October 3, 2023

State must stop stealing from retired state workers, teachers

MSEA-SEIU Retiree Member Dean Bailey, at right, lobbies legislators at the State House on May 23 with MSEA-SEIU Lead Member Political and Legislative Coordinator Beth White.

By Dean Bailey
Retiree Member, Androscoggin Valley Retirees Chapter

Starting in 2011, the Maine Legislature has used a wide variety of devices to steal funds from elderly retirees. These are individuals who served as state employees or public school teachers. The tragedy is that these changes build on each other year in and year out, resulting in compounding deflation of state pensions through the Maine Public Employees Retirement System (MainePERS).

When someone retires, their income is fixed in the dollars of the year that person retires. However, money changes in value every year due to inflation, sometimes more, sometimes less. A cost of living adjustment (COLA) is intended to assure that the retirees can purchase the same amount of goods and services in 30 years as they did the day they retired. However, under the current system, all state and teacher retirees in Maine will get poorer and poorer every year.

The devices the Legislature has used include:

  • Creation of the COLA base: Cost of living adjustments (COLAs) are only applied to a smaller portion of the pension, not to the full pension. This year, the COLA Base is $24,186. Any money over that amount does not receive a COLA and loses its value to inflation.
  • Underfunding of the COLA: Since 2011, the Maine Legislature has approved COLAs for this smaller amount that are far less than what inflation mandates. The cumulative COLA has been underfunded by 9.93%. In other words, the $24,186 only buys $21,780 in goods and services today in constant dollars.
  • Any pension funds over the COLA cap have lost 30.83% of their value. Going forward, assuming 2.5% inflation a year, these funds will lose 21% of their value in 10 years, or 52% of its purchasing power in 30 years.
  • Adding these together means the average state pension will lose 10% to 25% of its purchasing power every 10 years depending on the size of the pension. Larger pensions lose more than smaller pensions. I would have received over $5,898 more this year alone if my pension had been based on the Consumer Price Index, Wage and Clerical Workers (CPI-W,) the same measure used by Social Security. That is the result of uncorrected inflation.
  • In 2022, the Legislature provided 3% in COLAs, while CPI-U provided 8.6%. In other words, even when it provided a bit more for retirees compared to the COLAs in other years, the Legislature nonetheless still stole 5.6% from each elderly retiree. In effect, they stole $1,243 from each person. Of course, they did not steal the money, the let inflation do their dirty work for them.
    For retired state employees and public school teachers, this system guarantees that the older you get the poorer you will become. In your 70s, you will be comfortable, in your 80s, you will be living in poverty, in your 90s you will be starving. If you live to 100, your pension will purchase 40% to 60% of the goods and services it did the day you retired.

Public employees and teachers paid 7.65% of every paycheck into the MainePERS year after year, toward their pensions. We deserve better than to starve when we get older. The old narrative was that if you worked for a school or the State, when you retired, you would be taken care of for the rest of your life. The new narrative is if you retire from the state retirement system, the older you get, the move poverty stricken you will become. You can be sure that in 2024 when the Legislative reconvenes in Augusta, my fellow retirees and I will be there advocating for the retirement security we have earned.

To join the fight for fully funding the retiree COLA, contact MSEA-SEIU Lead Member Political and Legislative Coordinator Beth White at 622-3151 or beth.white (at) mseaseiu.org

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