State’s confidential employees’ pension plan costs state ‘extra’ $3 million
Pensions: The next budget crisis: Part 5
Editor’s note: This is the fifth part in a multi-part series about the state’s debt to teachers and state employees for their pensions.
AUGUSTA — As state employees and teachers head into a second day of fighting the governor’s proposal to take almost 10 percent out of their paychecks to cover their pensions and pension debt, about 1,200 state employees known as “confidentials” have no such worry.
Those employees — mostly in higher pay grades — will put only 3.65 percent of their pay into the retirement system if Gov. Paul LePage’s pension legislation is approved.
This would continue the longstanding gap that goes back to 1981 between regular state employees and the confidentials.
Confidential employees are defined as state employees not eligible for collective bargaining because they are either in high-level, policymaking jobs or they are involved in union contract negotiations.
Examples of positions classified as confidential include assistant director of nursing, budget analyst and civil engineer.
State employees and teachers testified Wednesday against the bill before the Legislature’s Appropriations Committee and more were expected to show up Thursday for the second day of the committee’s hearings.
Regular employees now contribute 7.65 percent of their pay to the pension fund and the state adds another 5.5 percent. Under LePage’s proposal, the 7.65 would go up to 9.65 and the state share would stay the same. The additional millions raised by the increase would help pay down the $4.4 billion pension debt.
The confidential employees currently pay 1.65 percent of their pay into the pension system. The state then adds the 5.5 percent it contributes for regular employees, plus another 6 percent, so that the total contribution to the system for the confidentials is the same as the total for regular employees: 13.15 percent.
But almost all of the pension costs for confidentials is borne by the state.
Last year, the state paid about $3 million more than it would have paid if confidentials contributed the same percentage as regular employees, according to calculations provided by the state Finance Department to the Maine Center for Public Interest Reporting.
The contribution difference means confidential employees take home a larger percentage of their paychecks.
A teacher, for example, who makes $35,000, now pays $2,677 per year into the pension system. That will go up to $3,377 if the governor’s proposal is approved.
A confidential employee, such as a staff attorney, who makes $75,000 per year, now has to pay $1,237 per year for his or her pension. That would increase to $2,737.
State documents also showed that the number of confidential employees has been going up steadily over the past decade.
At the end of Gov. Angus King’s administration in 2002, the state had 1,149 confidential employees. By the end of Gov. John Baldacci’s eight years in office, the number had grown to 1,258, a 9.5 percent increase.
Sawin Millett, the state’s finance commissioner and a veteran legislator and finance official in the McKernan administration, said the LePage administration is not considering making confidential employees pay the same as other employees toward their pensions and the pension debt.
He explained that in the early 1980s, confidential employees were offered the choice of a 10.5 percent pay increase over two years or a higher state contribution to their pensions. They chose the latter.
“Realizing the history,” Millett said, “they obviously forgo, or forewent, raises at that time, which they still haven’t gotten. The fairness approach, I think, would be to say everybody gets a 2 percent bump on their share.”
Chris Quint, executive director of the Maine State Employees Association, said his members feel otherwise.
“They definitely think it’s a fairness issue,” Quint said. “All this talk of a shared sacrifice, then it should be shared sacrifice for all around.”
One of Quint’s union members, Jim Betts of Winthrop, a claims adjudicator at the state Bureau of Unemployment Compensation, said, “I’m paying as a taxpayer for this unfunded liability, just like every other citizen in the state of Maine; then, on top of it, they’re taxing me again as a state employee, by freezing my wages, increasing my health care costs and now, raising, by 2 percent, to pay back the loan of the McKernan years.”
Two members of the Appropriations Committee said the issue of how much the confidential employees pay toward their pensions and the pension debt is not over yet.
Rep. John Martin, D-Eagle Lake — who has been in the Legislature almost continuously since 1964 — said the lower contribution rate for confidentials was based partly on the assumption that they would stay in state government fewer years than other employees and therefore would have smaller retirements, so the state felt it should contribute more.
“Frankly,” he said, “we haven’t looked at that for at least 10 years or so and we need to go back and look at it. … Basically, that hasn’t been looked at for some time and we’ve got it on the list to look at it.”
Sen. Roger Katz, R-Augusta, also a member of the committee, said, “We’re trying to find every way we can to get this budget in balance with as little pain as possible, so to the extent that there is a question about a large group of employees not paying the 7.65, historically how we got here, I don’t know, but it’s certainly something we will take a look at.
“Several of us on the committee,” Katz said, “may want to take a look at that, especially given the fairly significant number of employees involved.”
The governor’s pension bill includes not only the increase in the amount employees pay into the system, but also a three-year freeze on cost-of-living adjustments and other provisions designed to lower the cost of the system’s long-term debt.