March 3, 2013

As double-dipping grows, so does scrutiny of state pensions

Maine lawmakers, who’ve taken steps to discourage the practice, largely agree the public retirement system can’t be sustained in the long term.

By Eric Russell erussell@pressherald.com
Staff Writer

(Continued from page 2)

click image to enlarge

Lance Libby, 64, is a retired teacher who has gone back to work as a regular substitute. His wife, Linda Libby, 65, also is a retired teacher who works as a regular substitute.

Gabe Souza/Staff Photographer

click image to enlarge

Additional Photos Below

Related headlines

Because of a reporting error, the chart misidentified Donald Siviski. He is the former superintendent of RSU 2 but currently works for the Department of Education in Augusta.

The Portland School Department, the state’s largest district, has the most double-dippers of any employer, with 63, up from 45 in 2011.

James Ring, a project manager for the City of Bangor, is the only non-educator in the top 10 list of highest earners in 2012. He made $100,485 in salary and $84,691 in pension.

Ring was a longtime municipal employee and retired as city engineer in March 2011. Because of his experience, he was hired back immediately to help oversee the city’s role in the construction of a new arena and convention center. But his contract ends when the new facility is built.

WHY IT’S A PROBLEM

Until 2011, the age at which Maine public employees could retire and begin collecting a pension was 62, or 60 for employees who had at least 10 years of service by 1993. The age has been increased to 65 for new hires in part to help stabilize the pension fund.

The pension amount is based on a formula that takes into account three things: the average of an employee’s three highest years of earnings, the number of the years of creditable service and the employee’s age at retirement.

The Maine State Retirement System pension is classified as a defined benefit, which means retirees collect the same amount each year, sometimes adjusted for cost of living, no matter what happens on Wall Street.

It’s a lot like Social Security benefits, which makes sense because the public employee pension in Maine replaces Social Security. Workers do not pay into nor do they receive Social Security.

In the private sector, most employers have done away with employee pensions and replaced them with individual retirement accounts, such as 401(k)s, which are considered direct-contribution plans.

Workers pay in as much as they choose and their employer often matches up to a certain amount, but the fund fluctuates depending on how the money is invested. Any gains go to the worker but losses are the worker’s responsibility as well.

In pensions, the employer must absorb any market losses. In the Maine retirement system, that’s the state of Maine and local municipalities or school districts. Put another way, it’s taxpayers.

“We’ve made promises that we can’t back up,” said Webster, the Lewiston superintendent.

Luke Martel, a senior policy analyst with the National Conference of State Legislatures, said public pensions are a big concern in many states. Some states, including four last year, have made changes to their system to directly address employees who return to work. But states seem more interested in changing the system. Since 2009, Martel said, 45 states have enacted changes to retirement plans. In 32 states, the retirement age was increased; in 20 states, cost-of-living adjustments were reduced. Six states have made what Martel called fundamental changes to public pensions by phasing out the defined-benefit plan.

Maine lawmakers passed a bill in 2011 that made changes to the double-dipping law in an effort to discourage the practice. It created a restriction that says those who go back to work after retiring can only make 75 percent of the posted salary for that job. It also created a five-year cap.

This session, a bill sponsored by Rep. Peter Johnson, R-Greenville, would reverse those changes for educators.

“I think the original motivation was to cut down the number of superintendents coming back, but the unintended consequence was hurting ed techs or teachers, especially in rural areas,” he said.
Sen. Dawn Hill, D-Cape Neddick, sponsored a similar bill during the second session of the last Legislature but it was not approved.

“I don’t think (double-dipping) is immoral or unethical, it just doesn’t feel right,” she said. “Clearly, restricting pay has not stopped retirees from going back to work.”

Hill said a better tactic might be to stop allowing new hires into the pension system and replace it with a defined-contribution plan. She said that would not be an easy change.

Johnson said he understands the concern about the long-term sustainability of the pension fund, but he said people shouldn’t be upset with double-dippers. Those employees would be paid that money whether they went back to work or not. And those 2,334 employees in 2012 earned a combined $67.1 million, which represents only about  9 percent of the total benefits paid.

“I think we need to figure out how we can stop accepting new people into the retirement system and I think a lot of people want to see that happen,” he said. “But you couldn’t apply it retroactively. These retirees were promised benefits.”

Eric Russell can be  contacted at 791-6344 or at:

erussell@pressherald.com

Twitter: @PPHEricRussell

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors


Additional Photos

click image to enlarge

  


Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)