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LETTER: Pay-as you-go plan could end pension problem

To the Editor:

Maine State government is flawed; an example of this is the underfunded state employee pension fund.

State government claims it would be too expensive to honor existing pension and benefit agreements. The state has proposed a fix that includes no cost of living adjustments (COLAs) for three years, a two-percent employee increase in the retirement fund and, for new employees, delaying retirement until age 65.

This problem and the proposed fix have generated a dust storm of opposing views, making it difficult to fairly judge the problem. The various stakeholders are attractive, articulate and equally persuasive. I have heard that previous legislatures robbed (“borrowed,” if you prefer) pension funds to balance state budgets, heard that other legislatures lavishly modified pension and benefit agreements, freely and excessively obligated state (taxpayer) money to gain the favor of the state employees (voters).

I have also heard that state employees “game” the retirement system. They maximize their salaries for their final three years of employment by assuming additional duties, thereby increasing their retirement. Some, I am told, retire and accept a state pension, then walk back into their office the next workday, sit at the same desk and are additionally paid as a consultant or as a contracted employee. The name for this is “double dipping.”

I believe this happens, but I can’t fault them for doing it: they are just playing the game according to the rules. Given the same opportunity, and especially if government were threatening my pension, I might do the same.

Some of the rules severely penalize state employees. The federal government (another group of creative politicians) does not allow state employees to collect Social Security for the years they work for state government. Strangely, the federal government does not prohibit employees of Maine Medical Center, CMP and other companies from collecting both a company pension and a Social Security check when they retire.

It is possible for state employees, if they continue to work after retirement, to earn a Social Security check, but it will be limited to only 40 percent of the amount they would have earned if they had not been retired state employees. State employees are additionally disadvantaged in that, no matter how difficult their employment becomes, they are obligated to continue working for the state until retirement to avoid being financially penalized.

I don’t know who is more at fault, and I cannot envision a truly fair solution. But I am confident that whatever solution politicians finally cobble together, it will be at best, temporary. We should also construct a solution for the long term.

I would propose a pay-as you-go plan. End the pension and benefit program for new employees. This will not harm employees already vested in the state retirement system and in time, after existing employees retire, there will no longer be a pension problem.

Pay new employees the prevailing wage rate. Augment that by the amount the state normally contributes toward retirement. Allow them to finance their own retirement through 401Ks or similar plans. Offer state employees a fixed dollar amount (not a percentage) toward their health plan. This could be a group plan arranged by the state or an outside plan of the employees’ choosing. Some employees covered by their spouse will not require an additional plan and should not be forced to join one.

Under this proposed system, employees will be self-empowered. They will be able to leave state employment when they choose, will be able to take their retirement account with them and will be able to retire when they decide they are ready. Additionally—and this is important—they will be eligible for Social Security, just like ordinary people.

If we do design a new system, let’s pay employees an additional sum in lieu of annual and sick leave. They can then, if they choose, save to fund vacations and in whatever lengths of time their supervisor can spare them. They can save for sick days and if not sick be entitled to the savings. This, not unexpectedly, will result in fewer sick days.

In this pay-as-you-go system, the state will no longer create pension budget problems and will have to find a different fund to borrow or steal from.

Richard Sabine

Lewiston

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