"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) transferred...to 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?