State retirement system officials told the Legislature and the LePage administration they will need an appropriation $70 million to $80 million less than originally projected in the next two-year budget.
"This is not exact, but it is approximate," said Sandy Matheson, executive director of the Maine Public Employees Retirement System. "Instead of the $690 million we had projected, it will be around $610 to $600 million."
She said an exact number will be ready later in July and sent to the state Bureau of the Budget as it develops the next biennial budget to be presented to lawmakers in January. She said the $690 million figure was developed after lawmakers adopted a number of changes to the retirement system, and was based on the performance projections of retirement fund investments.
"This is a close heads-up estimate with everyone guessing what the market will do," Matheson said. "The number we give you in July will be final."
She said although the stock market has been volatile over the last year, the system's investments have been doing well.
Sen. Richard Rosen, R-Bucksport, co-chairman of the appropriations committee, said it's gratifying to see the reforms passed by lawmakers having a significant savings for taxpayers.
"This still protects the benefits for current retirees and for future retirees," he said. "This was a significant achievement."
Rep. John Martin, D-Eagle Lake, a longtime committee member, said it is "great news" that the retirement system will need less money, expecting the savings will mean fewer budget cuts or less new revenue to balance the budget will be needed by lawmakers in January.
"It shows the economy is doing better than many thought," he said, "and I think this will continue and we will see more growth and more people working in the next two years."
The largest savings are from the package of reforms lawmakers adopted, which froze benefits for three years and capped future increases to 3% a year, down from the 4% that had been allowed. The changes also apply cost-of-living increases to only the first $20,000 of yearly retirement income. Another provision increases the minimum retirement age to 65 for all new workers and for those with less than five years employment with the state.
The annual assessment on workers' compensation insurance policies has been reduced slightly and employers are pleased because they eventually pay that assessment through insurance premiums. They say it also shows more Mainers are working than a year ago.
"It's always good news when costs are reduced, the cost of doing business is reduced," said Peter Gore, vice president of the Maine Chamber of Commerce. He acknowledged the half percent reduction in the assessment will not mean big savings for employers, but is nonetheless significant given past increases.
David Clough, Maine director of the National Federation of Independent Businesses, agrees that all employers, large and small, will benefit from even a slight reduction in costs.
"This is money that a small business can invest in the business, maybe in additional employees," he said.
The Maine Workers' Compensation Board is funded by an assessment on insurance companies that sell workers' comp insurance and an assessment on large companies that self-insure. The rate on insurers is 2.53% and the rate on self-insured companies is 4.41%.
All employers are required to provide workers' compensation coverage so workers with on-the-job injuries get their medical bills paid and have income while recovering from an injury.
Gore said Paul Sighinolfi, executive director of the board for just over a year, has greatly improved the operations and deserves credit for reducing costs at the agency. The board's budget is $8.86 million for the year starting July 1, well below the $11.2 million authorized by state law.
"This is not just from our efforts to reduce costs," Sighinolfi said. "We have some surplus funds from this year we are carrying over and we have some payments from past years as the result of some audits of past year assessments."
He estimated 40% of the reduction in the budget is the result of efforts to control costs. One factor in the lower assessment is the significant increase in the salary base on which the assessment is computed, he said. Last year it was $188 million and this year it is $209 million. Gore said that is an indication that more Mainers are working and that the economy is starting to improve.
Sighinolfi said he believes the increase is a result of many factors, including more workers, higher wages and an increase in the workers in job classifications that have a high number of injuries. He said jobs in categories more likely to have claims have higher insurance premiums.
Federal cuts to job-training programs worry Maine Labor Commissioner Robert Winglass.
The adult training program was cut to $2.6 million this year from $3.2 million last year, resulting in a drop from 2,877 Mainers being served to 2,295. Another program for workers who have lost their jobs due to unfair trade practices is budgeted at $3.4 million this year, down from $4.5 million in 2010. That has reduced the number of workers getting training from 1,524 to 1,482.
"We have seen significant cuts in all of these training programs," said Winglass. "We are trying to reduce the impact on training programs by reducing administrative costs, but we can only do so much."
Most of the training programs are aimed at providing several weeks of training for specific skills, like a commercial driver's license or certification to operate a forklift or other specialized piece of equipment needed by a company.
Sarah Bigney, a Maine AFL-CIO organizer, said the administrative costs the department is seeking to cut are staff working with the unemployed to find them jobs.
"These are essential programs to getting workers back on their feet after they lose their job," she said. "The work-force investment boards do crucial work for Maine workers, to help them find jobs. We should be expanding them, not reducing them."
U.S. Rep. Mike Michaud said there should be more funds for training programs, but that will be difficult with budget cuts needed to reduce the federal budget deficit. He said the Obama administration has proposed some reorganization of the training programs to reduce administrative costs and their complex eligibility requirements.
Winglass acknowledged the number of training programs provided by the federal government and administered by the state can be overwhelming to the out-of-work Mainer, especially around eligibility.