Understanding the GPA Teacher Retirement Initiative

Questions continue to arise in the field about the proposed retirement initiative in the Governor’s proposed biennial budget. As you make preliminary plans for your 2013-14 school budgets, it will be helpful to understand what is and is not included in this proposal. Of course, you must keep in mind, as always, that nothing is final until the Legislature takes a final vote on the budget – much could happen between now and then.

Teacher Retirement Costs – State and Local

Without the proposed change, the total projected retirement costs to the State General Fund on behalf of local school units for FY2013-14 is $201,413,602. The chart below shows the pieces that make up that amount, and the proposed sharing of a portion of the total retirement costs.

Biennial Budget Part C. Section C-1

In this proposal, local school administrative units (SAUs) would be required to pay the “normal costs” associated with current employees – 2.65 percent of salaries – a statewide total estimated at $28,898,559 for FY2013-14.

In other words, the proposal would move $28.9 million or 14.35 percent of the total teacher retirement costs currently borne by the State into each SAU’s EPS allocation and share those costs by increasing GPA by $14,449,280. That is, the State would increase GPA by half of the amount of the normal retirement costs.

It is important to note that this retirement initiative reduces the State General Fund appropriation for teacher retirement costs by $14.5 million per year to help balance the FY2014 and FY2015 biennial State budget. Running the increased $14.5 million in GPA through the funding formula provides support for those new retirement normal costs more equitably among high receiving and low receiving school units.

Without the retirement initiative, SAUs would not be required to pay the retirement normal costs, the $14.5 million increase in GPA would not be included and a further more traditional reduction of $14.5 million per year to GPA would be required in order to provide the savings to balance the FY2014 and FY2015 biennial State budget.

Payments to Maine State Retirement System

School units and the state make required payments for teachers and other employees eligible to the Maine State Retirement System (MSRS) as follows.

SAU employees funded with State and Local funds under Chapter 606-B

Current

• 2.65 percent of salaries (normal costs) – SAU reports to MSRS, and MSRS bills the State – $28,898,599
• UAL paid by the State – $142,075,043
• 7.65 percent required employee participation – withheld from employees and paid by SAU to MSR

Proposed

• 2.65 percent of salaries (normal costs) – SAU reports to MSRS, and MSRS bills the SAU – this requirement totals $28,898,599
• UAL paid by the State – $142,075,043
• 7.65 percent same as current – paid by the employee

SAU employees funded with federal, private or public grants

Note: there is no change under the proposal.

• 2.65 percent of salaries (normal costs) – SAU reports to MSRS,  MSRs bills the SAU and the SAU pays from the federal, private or public grant
• 11.2 percent of salaries (UAL) – SAU reports to MSRS, MSRS bills the SAU and the SAU pays from the federal, private or public grant.
• 0.47 percent Administrative costs required on federal, private/public grants

Total SAU payments to MSRS = 14.32 percent

• 7.65 percent required employee participation – withheld from employees and paid by SAU to MSRS