Cities, towns, public utilities and school districts across the state are benefiting to vary degrees from refunds by the Maine Public Employees Retirement System.
The system recently disbursed to 96 public agencies more than $40.5 million in surplus retirement funding they put into the system when it was consolidated in the 1990s. Towns across Maine received the refunds, from Houlton ($345,359) in the north to Kittery ($17,184) in the south.
WHERE THE MONEY WILL GO
Westbrook received the biggest amount: $10 million between the city and its police and fire departments.
But the refund will have no noticeable benefit for Westbrook, City Administrator Jerre Bryant said. Westbrook already was drawing out of the funds held by Maine PERS to pay its annual $600,000 in employer contributions for employees who are in the state program and it will continue to use the money the same way, though it will now sit in a city reserve fund.
Bryant said the $10 million represents retirement contributions the city made before a large number of its employees decided to withdraw from the state program in favor of an alternate plan offered by the city.
Other cities and towns in southern Maine also received refunds.
Gorham and its police and fire departments will receive $768,583, while the midcoast community of Phippsburg is in line to get more than $448,000.
Cumberland will receive $189,626, New Gloucester is getting $135,219, Brunswick and its fire and police departments qualified for $136,480, and Freeport is eligible for $85,723.
The money comes from surplus retirement funds some employers brought into the public system when the Legislature consolidated it in 1993, said John Milazzo, general counsel and chief deputy executive director of Maine PERS.
To create a zero balance on the accounts, Maine PERS took the excess money and invested it. The money wasn’t used to pay pensions or retirement benefits.
“It is separate money that has been held in trust and invested prudently,” Milazzo said.
The public offices could have taken the money back at any time, but a change last year in reporting requirements from the Governmental Accounting Standards Board pushed Maine PERS to return the money.
In Pittsfield, the payment of more than $1.9 million is a “miracle,” Town Manager Kathryn Ruth said.
She was surprised that the small surplus it brought into the system about 20 years ago could balloon so much. The payment is equal to about three-quarters of the town’s $2.8 million annual operating budget.
“The town would have never been able to invest the money like that or get those rates,” Ruth said. “We look at it like a miracle.”
Pittsfield is going to use the money to stabilize the tax rate and fund some projects that have gone by the wayside.
The Kennebec Water District is putting its $1.4 million back into retirement accounts.
In Hallowell, City Manager Michael Starn said the $168,000 the city received was put into this year’s budget as one-time revenue to keep the property tax rate stable.
The city learned it would receive the money this winter and decided to use it as revenue rather than put it in a separate fund to pay the city’s employer retirement match.
“We debated going that route but decided against it,” Starn said.
Milazzo said the system previously thought federal law required that the money had to be used for pension-related costs, but it was told by the Internal Revenue Service during a review five years ago that the money could be returned to the employers with “no strings attached.”
With the investments becoming more cumbersome to manage and no restrictions on the use of the fund, Maine PERS decided to return the money to the employers, he said.
“We decided that it just made no sense to continue a situation to which complexity was being added,” Milazzo said.
“The bottom line is it really is the employers’ money, and they need to decide how they want to use it.”
Press Herald Staff Writers Leslie Bridgers and Dennis Hoey contributed to this report.
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