MSMA: Proposal could shift teacher retirement costs onto communities

Maine School Management Association

 Bulletin

May 15, 2009

Proposal could shift teacher retirement costs onto communities

The Appropriations Committee has approved a surprise amendment to the biennial budget that pulls $128 million out of the teacher retirement account and puts it into the account for General Purpose Aid, paving the way for a possible change in the law that would require local taxpayers to pick up part of the retirement costs now paid 100 percent by the state.

The amendment says the state will continue to pay the full cost in 2011, but also charges a committee to recommend whether some or all of the retirement costs should be run through the Essential Programs and Services funding formula, meaning they would be split between the state and local communities. Such a move would require a vote by the Legislature once the committee did its work.

If that change were made today, the costs would be split roughly 50-50, but the state’s share is dropping rapidly over the next two years, and could be at 45-55 by 2012.

The $128 million that has been pulled out of the retirement account is for fiscal year 2011 and represents the state’s current share of retirement costs for active teachers.  If that amount was run through the funding formula in 2012, more than half would have to be picked up on local property tax rates.

The amount each community would have to pay would differ since the state’s funding formula distributes GPA based on a community’s property valuation and enrollment. Minimum receivers, for example, would essentially have to pay 100 percent of their share of retirement costs.

The Education Committee on Friday got its first glimpse of the amendment, which was added to the budget late Thursday morning.

Sen. Justin Alfond, D-Portland, the Senate chairman, asked Education Commissioner Susan Gendron to run a spreadsheet so each community could see how much  they would have to pay if the change in funding was made. The committee has requested the information by Monday afternoon.

The Maine School Management Association and the Maine Education Association both testified before the committee about their concerns regarding the last-minute proposal.

Questions were raised about how a policy decision of such magnitude could be put in the budget without a public hearing, and whether the amendment was written to predetermine the outcome, which would be a cost-shift onto cities and towns.

 The Appropriations Committee is continuing its work today on the biennial budget and is expected to work through the weekend with a final proposal out sometime next week for the full Legislature to consider.