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Rep. Cebra Submits Bill to Ease Burden of Maine’s Public Pension System

AUGUSTA – State Rep. Richard Cebra has submitted legislation to temporarily suspend cost-of-living adjustments in the benefits paid out by the Maine Public Employees Retirement System (MainePERS). The bill also would increase the contribution levels of state workers and teachers from 6.5 percent of wages to 7.5 percent for six years.

Rep. Cebra (R-Naples) said his bill was driven by the stunning news from MainePERS that it will require a General Fund payment of $916 million in the next two-year budget, a $287 million increase over the current $629 million level. The next budget also will lack more than $600 million in federal stimulus money that has been used to augment state aid to local schools and MaineCare funding.

“I am under no illusion that the public sector unions will support this bill,” Rep. Cebra said. “But we are looking at a budget that may have to be reduced by $1 billion or more – nearly 20 percent of the General Fund. Everything will be on the table, and state employees and teachers can contribute by helping us alleviate this incredible new pension burden. After six years, hopefully, the economy will rebound and the system’s investment income can get back to normal.”

Rep. Cebra’s bill, submitted to the Legislature’s Revisor’s Office yesterday, will carry an emergency preamble; it would take effect next July 1 if enacted. Titled “An Act to Preserve Maine’s Public Pension Fund,” it would suspend for six years the annual cost-of-living adjustments (COLAs) paid to retired teachers and state workers.

Last year, the system paid $622 million in benefits. Recent COLAs have ranged from 4 percent in 2008 to 2.7 percent in 2007. “Significant savings would be realized over time because the COLAs compound on each other,” Rep. Cebra said. “We would sunset the suspension after six years.”

The bill’s second part would increase the employee contribution rate from 6.5 percent of wages to 7.5 percent, also for six years. Last year, the system took in about $122 million. Rep. Cebra said his bill would increase the contributions by about $18 million a year, or at least $108 million over the six-year period.

The MainePERS funding crisis stems from an investment loss of $2.25 billion in 2008, creating an unfunded liability of $4.4 billion. “We’re talking about a very significant problem,” Rep. Cebra said. “My bill would save some money as we deal with this fiscal emergency and help keep the system sustainable over the long term. Teachers and state workers count on their retirement system, and we want to make sure it’s there for them when they need it. But there is a limit to how much the state and the taxpayers can afford.”

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