The Legislature could be asked to restore some of the retirement benefits to state workers and teachers that were reduced during a budget crisis in 1993 under a plan costing an estimated $90 million.

The Legislature's Labor Committee was told last week the money could come from higher than anticipated interest earned on the state's retirement system fund - money the head of that system said is supposed to be used as a cushion for years when the interest doesn't come in as high as expected.

Opponents of the plan say it simply takes money that could be used to reduce the state's multi-billion-dollar unfunded liability in the retirement system and adds a new benefit - a move they say is unconstitutional.

The committee was scheduled to vote on the bill Monday, along with a $1.40 hike in the minimum wage over two years, but the meeting was cancelled because of the snowstorm.

Senate President Beth Edmonds is pushing for a solution to what she and many others have seen as a benefit inequity, created when retirement benefits were cut for employees with less than 10 years service in 1993.

That cut raised the normal retirement age from 60 to 62; increased the penalty for early retirement from 2.25 percent of benefits a year to six percent; and, requires there be no cost-of-living adjustment in retirement benefits until 12 months after an employee reaches normal retirement age versus 12 months after they retire.

The change in the system created what's known as "cliff" employees, because it affects only those who had fewer than 10 years of service as of July 1, 1993. And they are working alongside people, who can retire earlier with more benefits, simply because of their date of hire.

Edmonds put in a bill last year, "An Act to Restore Equity to the Maine State Retirement System," that would amend one aspect of the 1993 retirement rules by reducing the penalty for early retirement from six percent to three percent a year.

The way it works now, an employee, who had 10 years of service before the law changed, could retire at age 55 with close to 89 percent of their pension benefit. Those who didn't have the 10 years in would only get 58 percent of their pension at age 55 since the retirement age went up to 62 and the early-retirement penalty increased from 2.25 percent to six percent annually.

While some see the proposed change as an issue of fairness, others see it as adding to the unfunded liability the state faces by increasing benefits. The Legislature passed a constitutional amendment in 1995 that prohibits adding any new retirement benefit unless funding to pay for the increase is approved at the same time.

Sen. Peter Mills, R-Somerset, was on the Labor Committee in the 1990s, and said there has been constant pressure to restore the retirement benefit.

"The agenda of the state employees union and Maine Education Association ever since 1993 has been to restore those benefits," Mills said, but the enormous price tag, coupled with the constitutional amendment against adding to the unfunded liability for the Maine State Retirement System, has stopped the Legislature.

David Wakelin, an attorney who served on the Maine State Retirement System board, told the Labor Committee last week the money could be found by recognizing that the retirement system fund earned $700 million in excess of its actuarial interest rate for the fiscal year ending June 30, 2007. His proposal would apply $90 million of that to cover the cost of reducing the early retirement penalty to three percent.

Of that $90 million, $87 million would cover the estimated unfunded liability of the restored benefit and $3 million would cover the normal or annual cost going forward for the increased benefit for two years. The Legislature would have to include the normal cost in future state budgets.

Mills said Wakelin's plan flies in the face of the constitutional amendment.

"That money isn't ours to spend on a new benefit," Mills said. "If the system has a good year on its investments, all that means is that over time it tends to reduce the amount the state has to contribute to pay for the unfunded liability."

"It's unimaginable that you can improve a benefit and make the system absorb it," he said.