Friday, February 18, 2011

A Hospital and a Teacher Walk in to a Bar

"We need to be honest with the Maine people. This isn't about slamming anybody here; this is about paying your bills," said Paul LePage, speaking about the hospital debt that had been kicking around for over a decade. The Baldacci administration had of course paid down $3.7 billion on this decades-old “bill,” but the campaign rhetoric about the state “paying what it owes” resonated. Hopefully it still does.

The political theatre starring Maine’s unpaid hospital bills was choreographed by Communications Director, Dan Demeritt, who said, "and I’ll even make sure our members know the exact day the exact amount of State funding (is) their local hospitals so our members can show up with a big symbolic check to make it a press event. I like the visual of Garret Mason standing outside Central Maine Medical Center with a plywood-sized check in his hand signed by Paul LePage for $40 Million Dollars..."

Grab any teacher, firefighter or nurse, and ask them how they like the “visual” of a plywood-sized bill for $4.3 billion. That’s the amount these state workers will be taxed in order to pick up the state’s tab on its retirement plan, according to the Governor’s proposed biennium budget. Because in addition to the hospital “bill” that went unpaid over the past several decades, there are other bills as well, including a pesky debt called the Unfunded Actuarial Liability, or “UAL.” This debt reflects past normal costs of the state retirement plan that were not paid by the State of Maine.

UAL costs are past unpaid debts that are required to be paid by 2028 pursuant to an amendment passed in 1995 to the Maine Constitution. In 2007 we were 74% on our way to paying it off, but then the market crashed and billions of dollars in the plan were lost.

The LePage budget for the next biennium proposes a 2% payroll tax on state employees to pay this bill, plus an increase in the retirement age, and a freeze on any cost of living adjustments, while businesses and private sector employees will get a tax cut.

What’s ironic is all the GOP rhetoric about Social Security and how its bad and how it should be privatized and how its expensive and how employees should pay more and how businesses should pay less and how private companies have defined contribution plans and only bloated state governments have defined benefit plans.

It’s all a bunch of garbage that distorts the facts, but the anti-government mantra has convinced lots of people that it wasn’t the fat cats on Wall Street who screwed us, or rampant corporate greed and malfeasance, it was those lazy state workers!

The real facts are that state workers provide a valuable service, work for the public good, pay their fair share of a retirement plan that costs less than Social Security, and would be self-sufficient but for the state not properly funding its share between the 1940s and the 1990s.

Maine is one of 14 states that does not participate in Social Security. Instead, state employees are members of the Maine Public Employee Retirement System (MainePERS).

In the private sector, employees contribute 6.2% of their pay check, and employers pay 6.2% in to Social Security, a federal program under which the federal government bears 100% of the risk and pays a retirement benefit. Many private employers also offer, in addition to Social Security, a defined contribution plan such as a 401K, to supplement Social Security.

Currently under MainePERS, state employees contribute 7.65% of their paycheck, and the State of Maine contributes 5.5% in to the plan. This amount FULLY COVERS the cost of the current plan. (In other words, if the UAL didn’t exist, MainePERS would be fully funded for current state workers in the plan.) State employees who retire at the age of 60 or 62 get a defined benefit from MainePERS only. They do not get Social Security benefits.

The UAL is like the hospital debt, an unpaid bill that the state owes, except only state workers are being asked to pick up the tab.

And this isn’t about slamming anybody?


Stephen said...

As a retired state employee, I thank you for support and eloquence. Its also worth noting that if a state employee also works enough to qualify and is taxed in the social security system that his/her social security payments are reduced by about 80%. Eliminating that penalty would be a huge help.

Spelt Right Baking said...

Cynthia, this stuff seems so confusing. So, what's the scoop? Will state employees get the retirement they have paid into? Do hospitals really need the billions of unfunded costs? BTW, how much does an average day in the hospital cost? And, how much does a doctor get paid for doing the rounds? For perspective on some might be worth taking a peek at what the hospitals are charging. Are they as out of whack as some other professions, say lawyers? I guess, I'm a bit cranky these days as regular working person - seeing large dollars being paid to 'professionals' in the private sector while the rest being told to be satisfied with a mere living wage.

ASF said...

Why take this path? It's very likely the most basic politics related to rewarding those who supported the governor and injuring those who opposed him. The state's contracted debts to teachers are thus discarded and those to hospitals are honored. And there's the added piece that claiming hospital debts and pension debt are out of control promotes the false narrative that the state faces a fiscal crisis which requires injuring current and former teachers for decades to come.

Anonymous said...

Isn't it true that the extra 2% isn't even going to pay down the unfunded liability? I read the budget it looks like the 2% is decreasing the states share of the current liability not the UAL

Anonymous said...

don't forget-- people before politics. We just didn't think it meant only SOME people before politics. And who is the commissioner of DHHS? Oh the hospital lobbyist. what's sad is that Baldacci kept the budget balanced and now that the Obama economy is taking off and the state had a $300 million surplus, Lepage gives it away to his supporters. isn't the UAL a bill the State should pay? Can't wait to the costs we pay to hospitals drop now that they have "their" money. Wonder what a hospital administrator gets for salary and retirement?