BY MATT HERSH

A now defunct state pilot program is at the root of Salem’s retirement costs being almost double what was budgeted.

The town will have to pay as much as $675,662 to employees planning to retire over the summer and in the fall, according to Finance Director Jane Savastano. The town only budgeted $350,000.

“We’re going to have to come up with the money from other places in our budget,” she said.

At the Monday, July 16, Board of Selectmen meeting, Savastano said the town will be obligated to pay retiring employees for leftover sick leave, vacation time and holidays. The state’s pension program pays for the retirement benefits.

The number of employees retiring this year is significantly higher than in past years, Savastano said. Twenty will leave by the end of 2007, but officials only planned for eight to 10.

The reason for this high number of retirees is a state program commonly known as service crediting, which allowed municipal employees with five or more years of experience with any given town to “buy” additional years of experience.

These purchased years allow people to retire early with full benefits from the state.

The state ended the program this year, and the last opportunity to purchase experience was June 30.

But now Salem and other communities in the state are scrambling to make up the financial difference caused by the program.

At a meeting in May, Town Manager Henry LaBranche said the state might not have taken the impact to municipalities into consideration when they enacted the service crediting program.

Savastano said there may be some solace in the fact that all of the retiring employees were at a pay level higher than new employees will be at when they start.  This may help offset some of the costs, she said.

“I’m hopeful that there will be some savings in regular pay and health benefits because people will come in at an entry level,” she said.

Town officials have been planning for this financial hit for several months, during which the number of retirees continued to grow.

Savastano said she’s confident that the number won’t grow any higher, but it’s still going to take some work to find the money.

“It’s going to be tight but hopefully we’ll be able to make it up,” she said.