Maine Association of Retirees Files Suit in Federal District Court

The Maine Association of Retirees filed suit today in the Federal District Court in Bangor challenging legislation enacted at the last session of the Legislature that eliminated cost of living adjustments to the pensions of retirees for three (3) years and substantially reduced those adjustments thereafter. The suit was brought on behalf of the more than 28,000 retired state employees and public school teachers.

Previous to the enactment of the legislation, the Retirement System was authorized to grant cost of living adjustments to retirees' pensions in an amount up to 4 per cent per year based on the Consumer Price Index. In the new legislation, enacted as part of the state's biennial budget, the Legislature prohibited the Retirement System from making any cost of living adjustment whatever for three years, and limited future adjustments to 3 per cent on the first $20,000 of a retiree's pension.

The suit alleges that this action violated a thirty-four year promise by the Legislature that it would not alter retirement benefits once a retiree started receiving them, a promise that is protected by a provision of the United States Constitution prohibiting states from impairing the obligations of contracts.

The effect of denying cost of living adjustments can be devastating to the purchasing power of retirees' pensions over a long period of time, at a time in the retirees' lives when they will not be in a position to replace the losses by returning to work. In addition, if the Legislature can eliminate and/or reduce the promised cost of living adjustments that retirees are entitled to receive, then there is nothing to prevent the Legislature from reducing even more substantially - - or eliminating altogether - - other benefits promised to retired state workers and public school teachers. The suit seeks to vindicate the principle that those benefits cannot and should not be diminished or eliminated by the Legislature once a state worker or public school teacher has retired.

The suit also notes that the amount of money saved denying the cost of living increases for the first two years is about $48,000,000, while the amount of income lost to the State treasury as the result of reductions in taxes on high income individuals for that same period, also enacted in the same budget bill, is over $88,000,000. Although the Association recognizes that the State faces significant financial challenges, there are many ways of addressing those challenges other than on the backs of those who devoted their careers to state service and teaching our kids.