King claim about pension funding neglects to tell the full story

Russ Dillingham/Sun Journal

Angus King.

In promoting his independent candidacy for U.S. Senate, Angus King claims credit for improving the financial condition of the state’s pension fund during his two terms as governor.

About this series

This is the second story in the Maine Center for Public Interest Reporting’s continuing coverage of the candidates for U.S. Senate from Maine. The series — “Setting the record straight” — will appear between July and October in advance of the Nov. 6 election and is focused on the claims each candidate has made about his or her record, with special emphasis on the key issues facing national leaders: jobs and the economy.

The accuracy of the claim, made on his campaign website, is important because Maine, like most states, has a history of falling far behind in funding its pension obligation.

The Maine Center for Public Interest Reporting examined the claim for accuracy and completeness, relying primarily on records from the Maine retirement system and legislative studies.

The research shows that while the pension system finances improved when King was governor, a major reason wasn’t because of anything he did. It was because he was governor during the stock market’s glory years when the system’s investments went up by double digits.

King’s use of statistics to make the case for himself have another problem: He counts only the first six years of the governorship, when the pension funding improved, and skips over the final two years, when the funding declined, although it was still better than when he took office.

King claimed on his campaign website that he “improved the financial condition of the Maine State Retirement System by increasing the actuarial liability funding from 45 percent in 1995 to 74 percent in 2000, and the accrued liability funding from 65 percent in 1995 to 100 percent in 2000.”

“Actuarial liability” refers to whether enough money has been put aside to pay all future pension costs. Pension experts consider 80 percent fiscally sound.

The “accrued liability” number shows whether the state has put away enough money to pay its pension costs if everyone in the system retired immediately, and is more a reference point than a practical issue.

It is true that when King took office in 1995, the state had not put enough money aside to pay the pensions of state employees and teachers. This funding gap is known as the unfunded actuarial liability, and it represents billions of dollars and costs as much or more every year than what the state spends on higher education, for example.

The underfunding predates King’s administration. The set-aside money had become as low as 28.9 percent in 1987, but had been steadily improving between then and when King took office. King took office in 1995, when the funding level was at 45.4 percent, as his campaign website states. He then selects the year 2000 to cite how much things had improved while he was governor: to a funding level of 73.6 percent (King rounds it up to 74 percent).

But those numbers don’t cover the full eight years of his administration — only 1995 to 2000. He was governor through 2002. If he had picked his final year in office, the numbers would not have been as impressive: 69.4 percent funding rather than the 74 percent he boasts of achieving.

Kay Rand was King’s chief of staff when King was governor and now serves as his campaign manager. She said the pension statistics cited on the King website came from an “accomplishments memo” prepared by the state’s Finance Department in late 2001,which is why it does not include the final two years of King’s terms in office.

“We can go back and check that . . . and probably should have,” she said.

In an email to the center, King wrote that the errors on the campaign website were an “accident.  . . . I can personally assure you this was not deliberate.  . . . We put a lot of material together in a hurry at the beginning of the campaign and this one just got by me.”

King wrote that the “Angus 2012” website uses “the 2000 data because that was what was available at the time it was written. When transferring the figures to the Web page, (Rand) didn't focus on the 2000 date and neither did I when I approved the sentence in question.”

On Sunday, the King campaign corrected the reference to the pension on the website.

The stock market effect

In the six years for which King takes credit for the pension funding improvements, the pension’s investment returns were between 13 and 25 percent in all but one year, when the decline was about 4 percent, according to a “Performance” report by the system.

A 2010 state-funded study of the pension system notes that there were “17 years of continuous improvements in the plan’s funded status” dating back to three years before King became governor, going through his two terms and all the way into the second term of Gov. John Baldacci.

The report says the improvements were “attributable to two primary factors; 1) the state’s willingness to make the actuarial required contribution to pre-fund and fully fund the plan and, 2) the run-up of the bull markets during the 1990s.”

King can take at least partial credit for the improvements because while he was governor, he proposed legislation that put extra money into the retirement system so that the debt — in effect, a mortgage — could be paid down in fewer years.

King wrote that the pension funding analysis on his website “should have extended beyond 2000 and the role of the market acknowledged (although our decision to shorten the amortization schedule (twice) as noted below had the effect of insuring that the market gains accrued entirely to the fund and not in part to the General Fund, which would have otherwise been the case).”

King, who was an independent governor, supported a bill proposed by Democratic legislators that eventually led to the voters approving a change in the state constitution that required the state to pay off the pension by 2028 and prohibited the Legislature from adding new pension benefits without funding them.

Pension experts widely praise the constitutional amendment as an example of fiscal responsibility, although it didn’t solve all of the problems. The 2006-07 recession caused another drop in the system’s funding status, prompting Gov. Paul LePage and the Legislature last year to reduce pension benefits to avoid an eventual doubling of the annual pension costs.

The reduction meant that instead of the state paying $9.63 billion in pension costs between now and 2028, the cost will be $6.19 billion — a 35.6 percent smaller bill.

The Maine Center for Public Interest Reporting is a nonpartisan, nonprofit news service based in Hallowell. Email: mainecenter@gmail.com. Web:pinetreewatchdog.org.

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Comments

Randall Berry's picture

Hogwash

Another front page Christie/Schalit expose about nothing. Reamortizing in 1998 was predicted to save $2.7 billion in interest payments.

FRANK EARLEY's picture

Why does this have to be so rediculus??????

Maybe I'm missing something here, it wouldn't be a first for me, but who cares? If things go well, while a Democrat, Republican, or Independent is in office they take credit for it, whether they had an actual hand in things or not. Thats fine. However if one of the three has things go down hill, everyone jumps on them like their the return of the plague. I can understand that too. What I can't understand, is that a lot of things need to happen, without politicians being able to help or hurt. I make money and lose it daily in stocks, thats what their supposed to do. Any politician, in any office is at the pleasure of "luck". From the president on down, no one has all the answers. It just goes back and fourth, it makes no difference who does what. No one can do it all. Maybe instead of fighting each other, they could combine ideas to improve things for the people. There's a lot of wasted energy out there...

Barry King's picture

Valid Point, Frank

I whole-heartedly agree.

Barry King

Barry King's picture

A wolf in sheeps clothing...

...or perhaps I should say a Republican in Independent's clothing.

The only change that I can see in Angus King is his political party affiliation.

We had two (believe it or not) terms to learn which way Angus "rolls". If you were satisfied with his performance as Governor of Maine, then vote for him as Senator. If you weren't, then VOTE for the DEMOCRATIC candidate, CYNTHIA GILL and balance the scales in Augusta.

Most importantly, YOU MUST VOTE, regardless of political orientation (we know that you were, in all likelihood, "born that way", and we don't hold it against you)!

We currently have Governor LePage as a result of the political apathy that is prevalent in Maine. Need I say more?

Sign me, NO RELATION TO ANGUS,
Barry King

Mark Elliott's picture

Oh Barry! Your comment: "or

Oh Barry! Your comment: "or perhaps I should say a Republican in Independent's clothing." tells me you are QUITE out of touch with the reality of politics in Maine. Take a look at which party Angus gives financial support to and you'll see what I mean....LOL It is NOT the Republican Party!

Barry King's picture

Hi, Mark

I guess that you simply made a typo, I've done it myself, but it throws the context of your posting askew.
Angus doesn't GIVE financial support TO the DSCC, but unfortunately, he HAS RECIEVED a great deal of financial aid FROM them.

I am NOT "out of touch" with the reality of politics in Maine, I just disagree with them. I responded to this post from within my YAHOO email and didn't read my original posting before commenting here, so I may be embarrassed, but I don't remember writing ANYTHING about political fund raising.

My point was to encourage EVERYONE TO VOTE, and secondary to that message I "campaigned" for the Democratic Senatorial Candidate to "balance" the legislature again, as it used to be back in "My Day", when heated debates were common and it was very difficult for either political party to "slam dunk" the party line because they had a majority of seats.

If I were "King" for a day (pun intended) I would mandate equal seats in all legislative bodies. That would ensure that the desires of the "regular" folks would be abided by. All ties would be settled in promptly scheduled referendums.

I am, as you can tell, a "Dyed in the wool, Democrat" and I support Dill, in part, because of her stand on Preserving the Forests, Same-Sex Marriages and her belief that money and political influence should NOT dictate policy. "We the people should decide that"!

Barry King

Mark Elliott's picture

Actually Barry, with the

Actually Barry, with the exception of traditional marriage we are mostly in agreement. My response, however, was solely aimed at your comment where you said: "or perhaps I should say a Republican in Independent's clothing." implying that Angus King is really a republican pretending to be an independent.......that view in itself is totally skewed. It is widely known that Angus is very "left wing liberal" hence my reference to his ties to the democrat party. He would never survive in the republican party.....

Mark Elliott's picture

More to read about Angus and

Barry King's picture

Perspective is Everything, Mark

First of all, I thank you for providing the live links. I read the entirety of both articles, but I don't see how they contradict my opinion in any way. Conversely, Mark, they blatantly make my point that political apathy is dangerous and everyone should make their voice heard at the polls. One vote CAN make a difference!

Barry King

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