2010 governors race: State pension problem

For a lot of Mainers, the state’s pension problem is difficult to grasp.

Here’s how it breaks down: The state currently owes the public employee and school teacher retirement system more than $4.4 billion, and it has until 2028 to pay it.

The deadline is mandated in the state's Constitution.

According to a detailed examination by the Maine Center for Public Interest Reporting, a nonprofit journalism center, sharp dips in the stock market, where the pension is heavily invested, have severely hampered the state’s ability to meet that obligation.

According to that report, the result is a system that already takes one of every 10 state tax dollars. In about five years the pension fund could account for 20 percent of the state budget.

The unfunded liability has already impacted municipalities. The problem was one of the main reasons communities witnessed sharp decreases in state revenue sharing and education aid, the MCPIR examination said.

Maine isn’t the only state with the problem. But unlike some others, it has yet to take significant steps to fix it. West Virginia, for example, has eliminated retiree health care benefits to newly hired state workers and public school teachers.

The next governor will likely have to consider a similar move, or strike the mandate from the Constitution. Such steps could be difficult as the governor weighs the pros and cons of putting an unfunded liability on the backs of taxpayers versus upsetting various public employee unions, whose members are worried about losing benefits they've long contributed to.

Kevin Scott, 42, independent

Scott believes the state should meet its obligation to state employees, but to stop hiring new employees under the old system.

"It's critical people understand that state workers contribute to their pensions, just like private workers do," he said.

He said his plan for a voluntary, 32-hour work week for public employees could be used to pay down the debt.

Shawn Moody, 51, independent

Moody said the first step to solving the pension crisis is finding out how it happened.

"I'd do an immediate investigation to find out who was managing these funds and how we ended up so deeply invested in the stock market for a pension plan," Moody said. "Instead of people becoming upset, they should be taking their energy and publicize how this happened. I'm not satisfied that they've done that."

Moody believes residents would support amending the Constitution to eliminate the pension requirement, but said it would be a divisive issue.

He said the issue illustrates the division between the private and public sector.

"The perception out there is state workers are worried about the tenure, job security," he said. "The reality in the private sector is you are worried about quality, efficiency, customer service. We have to perform in our jobs every day."

He added, "I think there were 500 (state) workers who earned over $100,000 several years ago, now there's like 2,000. How did that happen?"

Libby Mitchell, 70, Democrat

Mitchell said she will "honor the promise" the state made to public employees.

She said funding the system would be predicated on the rebound of the stock market. She also supports reviewing some of the funding assumptions that were used to determine the amortization schedule.

She doesn't favor amending the Constitution to change the amortization schedule.

"That would be too late and I don't think the people of Maine would be supportive," she said.

"Maine is fairly well-funded compared to some other states," she added.

Paul LePage, 61, Republican

LePage said the state has "given away the kitchen sink" with benefits for public workers.  

"Some of the benefits in the pension plan are far and away things that you would never, ever see in the private sector," he said.

Nonetheless, LePage favors honoring the commitment the state made in setting up the system. He said he would try to grandfather employees currently enrolled in the system while designing a new system for new hires.

Said LePage, "Can I promise that there won't be modifications to the old system? No, I can't. I would be an absolute idiot to make that kind of commitment."

He also supports pushing back the funding deadline.

"I don't see how we can get there in 18 years without cutting state government in half," he said. "And I do not intend to cut state government in half."

John Jenkins, 58, independent

Jenkins said he was familiar with the problem, but would order a comprehensive review before mandating a solution.

"Unfortunately, previous administrations, sequentially, have raided the fund to balance the budget," he said. "They ducked that bullet, but they passed the gun on to someone else.

"We're in debt up to our eyeballs," he added. "We need to open the books and see exactly how we got into this mess."

Eliot Cutler, 64, independent

Cutler said his priority would be to keep the "mountain from getting bigger."

"We have to do something to relieve the pressure," he said. "We can do something constitutionally about that, perhaps a different amortization schedule."

Cutler said he would also consider examining current cost-of-living increases and extending the retirement age in the system.

Going forward Cutler said he would look at changing the pension system to give state employees portability through 401Ks.

"We need to move away from defined benefit plans to 401Ks," he said. "Maybe we end up with a hybrid."

Tomorrow: Maine's looming $2.6 billion transportation problem

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Comments

 's picture

LePage and Moody are on it.

LePage and Moody are on it. State workers should have a 20% reduction in pay, There are currently 2nd and 3rd tier management in Augusta making six figure incomes. Not even close to what they would get in the private sector. The amortization should be pushed back. Or.....lets send AIG a bill for the losses.

 's picture

Financial Peace University

Maybe Maine should get in touch with Dave Pamsey's Progrom Financial Peace University. We might get out of Debt soon.

 's picture

Jenkins

I have yet to hear an idea from him about anything or a solution to any problem. Do you suppose that the job sounds like "fun" to him and that he is clueless as to what the responsibilities entail? What a waste of time. And Libby wants to keep spending as usual. At least the other four have suggestions and seem to recognize that yes, there is a freaking problem.

 's picture

no patience left for libby

27 years of entitlement spending has got us here.It is time for a fresh look at the problem.Paul lepage is the man for the job.

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