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Home > MSMA News > Retirement costs up 18 percent – August 5, 2016

Retirement costs up 18 percent – August 5, 2016

The retirement costs school districts have to pay for their working teachers are projected to go up 18 percent in the next biennium, an increase that will raise the current $38 million statewide contribution to $46 million, starting in 2017-2018.

Those costs, known as normal teacher retirement costs, were shifted onto local districts from the state in the 2013 biennial budget when the statewide annual cost to districts was $29 million. That cost went up 25 percent or $9 million in the last biennial budget, and with the 18 percent projected hike will increase another $8 million in the 2017-2018 school year.

The hike is a projection because the total cost ultimately is based on what districts negotiate for teacher salaries.

The major contributing factors in the projected increase are two-fold, according to the Maine Public Employees Retirement System (MainePERS), responding to an inquiry from Maine School Management Association.

An experience study was done that looked at employment patterns of Maine teachers. It showed an increased life span, decreased turnover, more teachers staying long enough to be vested, and teachers retiring at an older age.

Investments earnings also have remained sluggish, prompting the retirement system to lower its projected investment rate from 7.125 to 6.875.

MainePERS is putting together communications to explain the rate increase to its members.

The retirement system is releasing information earlier this year than in years past so school districts can budget the additional money. The Maine School Boards Association (MSBA) passed a resolution in 2015 calling for more public discussion and legislative oversight on how the rates are set because of their growing impact on school budgets.

Both MSBA and the Maine School Superintendents Association strongly opposed the cost-shift of normal retirement costs onto schools districts – a move done to save money in the state budget. School leaders were concerned about the very increases districts are now experiencing, which take funding away from student learning.

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