AUGUSTA, Maine — Saying they are not to blame for Maine’s budget woes, state employees and retirees called upon lawmakers to reject proposed changes to Maine’s pension and retirement system during the first day of hearings on the LePage administration’s $6.1 billion spending plan.
Wednesday’s crowded hearing before the Appropriations and Financial Affairs Committee was likely a precursor to larger, even more boisterous gatherings planned for Thursday to protest the package of pension reforms and cost-cutting measures in Gov. Paul LePage’s budget.
Active and retired state workers are upset about administration proposals to increase employee contributions to the pension system by 2 percent, to raise the minimum retirement age from 60 to 62 and to freeze, and then cap, cost-of-living adjustment for pensioners.
Those changes, according to LePage, will save more than $400 million over the biennium and begin to address the estimated $4.3 billion shortfall in the pension system for state employees.
During brief remarks to the committee, the governor said the state’s pension obligation, without reform, could consume one-quarter of General Fund revenues by decade’s end.
“If we let the problem get to this point, Maine’s defined pension system will cease to exist and our promises to retirees will go unmet,” LePage said. “Let me say it again: If we do not act, people in this room will be forced to make funding decisions so dire that our current state retirement system will have to be cast aside.”
But during several hours of testimony on Wednesday, state workers and retirees accused LePage and his supporters of demonizing public servants for political gain and punishing workers for the financial short-sightedness of past governors and Legislatures.
“We are in no way responsible for the situation the state is in,” said Lois Baxter, a retired state worker from Orrington. “We have faithfully paid our 7.65 percent [toward retirement] over the years. It is the state that did not pay its share.”
Throughout the afternoon, committee members heard emotional and sometimes tearful tales from state workers or retirees concerned about making ends meet on less.
A former state worker from Auburn who is disabled told the committee he and his wife, who is also disabled, were already “going broke” and couldn’t afford the additional health insurance costs that would be borne by some retirees in LePage’s plan.
Others said freezing the cost-of-living adjustment for three years and then capping the COLA at 2 percent thereafter is unfair to retirees on tight budgets already struggling to keep up with rising food, gas and oil prices.
Still others were livid with suggestions by the Maine Heritage Policy Center’s Tarren Bragdon that state employee pensions were “lavish” compared to the private sector, statements speakers said underscores a political agenda.
The average annual pension for state retirees is approximately $19,000, and many are not eligible to receive Social Security benefits due to their state service.
“With all due respect to the Maine Heritage Policy Center, I am not the problem,” an angered Penny Whitney-Asdourian of Scarborough said. “I am not the enemy in this budget crisis. And I refuse to be identified as such.”
There was also palpable anger at what speakers said was a classic example of taxing lower-earners to pay for tax breaks for the wealthy.
LePage’s budget plan calls for lowering Maine’s top tax rate — which applies to single people earning roughly $20,000 and couples earning $40,000 — from 8.5 percent to 7.95 percent. It also raises Maine’s personal tax exemption amount to conform with federal standards.
But workers decried LePage’s proposal to eliminate the estate tax for estates valued at up to $2 million, a move the governor claims will help keep family-owned small businesses or farms in operation after a death in the family. Current law exempts estates valued at $1 million or less.
“To take hundreds of millions of dollars out of [state workers’] pockets by breaking the promise that the state of Maine made to them is wrong,” said Bruce Hodsdon, president of the Maine State Employees Association/Service Employees International Union.
“Then to use their money to fund new proposals that include even more estate-tax breaks for multimillionaires and income tax breaks for Maine’s wealthiest citizens is also wrong,” Hodsdon said.
But state Treasurer Bruce Poliquin, who supports the pension reform proposals, said neither state employees nor taxpayers are to blame for creating an underfunded “fiscal monster.”
“I hope as you deliberate you will not engage in a blame game because that will not help anyone as we attempt to fix this problem,” Poliquin said.
Wednesday was the first of what likely will be at least four lengthy days for the committee as they begin four weeks of hearings. Next up on the committee’s agenda is discussion of state employee and retiree health insurance proposals on Thursday, and teacher retirement contributions and eligibility on Friday.
Earlier Wednesday, more than 100 supporters and critics of LePage’s proposed budget gathered in the Hall of Flags outside of the committee room. Supporters of LePage’s budget plan held signs with slogans such as “End Union Greed” and “You can’t Spend What You don’t Have. Support the Budget.”
Across the room, union employees wore purple T-shirts saying “Stronger Together” on the backs.
Much larger, dueling rallies and protests are planned for Thursday when hundreds of unionized state workers are expected to cram the State House alongside supporters of LePage’s budget proposals.
The Associated Press contributed to this report.