Schaefer mulls retirement measure veto 2,600 state workers could take early out

May 09, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- Gov. William Donald Schaefer is considering vetoing a bill that would offer nearly 3,000 state employees the chance to retire early and raise their retirement benefits by nearly 17 percent.

Both Mr. Schaefer's budget department and the board that heads the state's retirement system have recommended a veto.

The early retirement bonus has captured the attention of eligible state employees -- those 50 or older with at least 25 years of state service -- although not all would take it.

For Edward C. LeCompte, 57, chief auditor in the state's Sales Tax Division, a veto would make little difference. Although eligible for the early out, Mr. LeCompte has concluded it is the right plan at the wrong time of life for him.

But for co-worker John Luber, 66, the division's fiscal administrator, a veto would end his chance to increase his expected retirement benefits by about $350 a month. He is rooting for the governor to sign the bill.

Mr. Schaefer was handed an either-or proposition by the 1992 General Assembly: either sign the bill or eliminate 600 or more vacant state jobs to save money.

As part of a broader legislative effort to cut costs by trimming the state's 73,000-member work force, the early retirement bill is projected to save $20.9 million in fiscal year 1993 alone.

But if Mr. Schaefer vetoes the bill, a separate provision in the state budget will require him to keep next year's spending plan in balance by cutting at least $17.5 million through eliminating the vacant positions. About 4,000 state jobs are now vacant.

By rewarding workers for retiring early, the bill would cost the state more money than abolishing vacant positions. The bill also would give state agencies far less flexibility in deciding which jobs to eliminate and which to keep, said Frederick W. Puddester, the governor's deputy budget secretary.

Under the bill, eligible employees could retire early between July and Aug. 31, 1992. Those who qualify would receive two extra months of credit for each year of state service -- on average, nearly 17 percent more in pension benefits.

Because an early retirement plan only saves money if some positions remain vacant, the bill requires that 60 percent of the jobs of those who take early retirement be abolished.

At least 2,661 employees are believed eligible for the plan, said Howard Pleines, director of legislation for the Maryland State Retirement Agency. Other states that have offered similar plans have averaged 42 percent participation, meaning that an estimated 1,118 employees would be likely to retire early if the Maryland bill is signed.

Sixty percent of those employees, or 671, would not be replaced.

"If I [have to implement] early retirement, it is haphazard. There could be jobs I don't want to lose. They could be the institutional memory of the state," Mr. Puddester said.

The state would also have to cover the extra $39.3 million the incentive program would cost by reimbursing the retirement system.

"If I take 'Option Two,' it's [a reduction of] the same amount of positions, the same amount of money, but it is not done haphazardly. It lets the managers decide where they could lose vacant positions. And there is no hit on the pension system," Mr. Puddester said.

The trustees of the Retirement and Pension Systems also requested a veto, saying they opposed the limited scope of the early retirement offer. The plan affects fewer than 3,000 of the system's 170,000 members.

Mr. Schaefer has until May 26 to decide what to do.

Mr. LeCompte, with 26 years' service, is one of about 80 eligible employees in the comptroller's office. But he wouldn't take the buyout.

He says he and his wife are in the process of buying a new house, that she is not employed, and that he wouldn't be eligible for Social Security for several years. He doubts he and his wife could live on a $14,000-a-year state pension alone, even with the early retirement bonus.

By contrast, Mr. Luber, with nearly 35 years' service, says he would be playing "Russian Roulette" if he did not take advantage of the early retirement bill.

"I really don't want to retire. I'm in fairly good health and I don't have to retire, and I'm not anxious to retire. But at 66, suppose my health goes bad in another year?" he asked. The bonus would add another 70 months' credit to his retirement, increasing his monthly benefit by about $350, he said.

"I wasn't even thinking about [retiring]," he said. "But ever since this bill passed, I have been."

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