The Maine State Retirement System – and the nearly $3 billion the state owes to keep the plan solvent in the future – has taken center stage in budget deliberations.

Most taxpayers, however, are unaware of how the system works for the more than 173,000 current and former state employees covered by it.

There are 57,500 current employees in the system, including teachers, state workers, some municipal employees and even legislators, who are vested after five years of service. There are 84,000 or so inactive members, who once worked for the government and now are working elsewhere, but kept their money in the system. And, 31,400 retired employees draw pensions, according to enrollment figures for the start of the current fiscal year.

Benefits for most employees are based on an average of a person’s three highest years of earning, multiplied by the number of years worked, which is multiplied by 2 percent. For example, someone earning average top wages of $100,000, who worked 25 years in the system, would get an annual retirement benefit of $50,000. At $50,000 for a 25-year worker, the annual benefit would be $25,000. The retirement age for regular employees is 62.

State employees – most of whom are not covered by Social Security because Maine has opted out of the program for its workers – contribute 7.65 percent of their salary, and the state kicks in 6.04 percent. Assets are then invested in interest-bearing accounts, and the system’s goal is to earn at least 8 percent interest on its money.

On top of payments to cover the state’s employee match, the state also has to pay down the $2.9 billion unfunded liability that built up over the years when the Legislature added or changed benefits without regard to their future cost. Benefits owed to teachers make up the greatest share of the debt because they represent the largest percentage of workers in the system.

“The Legislature improved benefits for people,” without budgeting additional money to pay for them, said Gail Wright, acting director of the retirement system.

In 1997, a constitutional amendment went into effect requiring the unfunded liability must be paid off no later than 2028, and that no Legislature can make changes to the system that cost money without providing for that money in the current budget.

Paying off the debt has been part of Gov. John Baldacci’s state budget plan. First, he proposed selling the retirement system lottery-backed bonds offering an 8 percent return. The new plan is to have the state sell revenue bonds and use part of the proceeds to make early payments on the retirement debt to reduce interest charges.

David Wakelin, chairman of the Maine State Retirement System board of trustees, likes the second plan a lot better, because there were questions about whether the retirement system could legally invest in the state’s lottery-secured bonds.

“As trustees, we’re very pleased with the current proposal,” Wakelin said.

What employees get from the plan is determined by what they do.

The majority of state employees and public school teachers are in regular plans, but certain professions are in special plans and advocates are always lobbying the Legislature to get their group in.

State Police still get what’s known as the gold standard for benefits – 25 years of service, and they’re eligible for benefits, no matter their age.

It used to be 20 years and out, but the rules changed in 1984, when the Legislature realized the system was becoming too expensive. That year, a lot of people who were in special plans – including the Inland Fisheries and Wildlife and Marine Resources wardens – got kicked out.

“Many of the special plan people were put in regular plans and have been advocating to return to special plans ever since,” said Wright. “There is constant pressure on the Legislature,” and groups have been allowed back into modified special plans.

Under the regular plan, a person is vested after five years of work, and then eligible to draw benefits at a predetermined retirement age.

Prior to 1993, when the plan was changed again during a budget crisis, regular employees could retire with full benefits at age 60. A person could retire before that but was charged a 2.25 percent benefit reduction per year of early retirement. In 1993, the regular retirement age was raised to 62, with a 6 percent penalty for early retirement.

Aside from the state police plan, there are special plans for about a dozen types of employees today, covering the Baxter State Park Rangers, firefighters at Bangor International Airport, state prison employees, Department of Environmental Protection hazmat workers, Marine Resource and IF&W wardens, capital security officers and others.

They offer benefits at earlier retirement ages – largely 50 or 55.