AUGUSTA – Maine’s debt to its retirement system for state employees and teachers could crowd out funding for other needs, the state’s treasurer warned Wednesday.
Bruce Poliquin said a report from the retirement system that’s due out in a few weeks will provide data for studying the issue. Lawmakers will have to find a solution over the coming months, he said.
“What currently keeps me awake at night is the growing unfunded pension liability for teachers and state workers,” he said during a news conference at the State House.
That debt, pegged at $4.3 billion, must be fully paid by 2028, according to the state Constitution. Poliquin, who took over as treasurer this month, said he fears that needed funding for schools and universities will get crowded out by the pension debt.
“The next fiscal year, the cost to taxpayers is $450 million,” he said. “As a comparison, today we spend $260 million to support our university and community college systems.”
Poliquin, who ran in the Republican gubernatorial primary last year, offered no solutions to the problem. But as treasurer and a board member of the Maine Public Employees Retirement System, he said he is eager to work with others to find a way to pay down the debt.
There are 40,486 active state employees and teachers, and 27,544 retirees who are covered by the system.
The retirement system debt is not new, nor is it unique to Maine. Nationwide, it’s estimated that state retirement systems face a combined deficit of $1 trillion, according to the Pew Center on the States.
Before 1995, Maine’s annual costs associated with the plan were not always fully funded. That created, and compounded, the debt over time, according to the retirement system.
Also, because the $10 billion in retirement system assets is invested in the stock market, the recession has eaten away at the funds available to pay benefits for retirees.
The system is now funded at the 68 percent level, according to the retirement system. Healthy plans are 90 percent funded or more.
Poliquin rejected the idea that states should be able to declare bankruptcy because of their pension debt, or that the state Constitution should be amended to allow more time to pay back the obligation.
“Although we did a very poor job … early on in funding this program, the last 15 or 20 years we’ve done a fairly good job trying to catch up,” he said. “Part of that is the fact that we now have a discipline to pay off this nagging debt in 2028. I think it would be a mistake to change that.”
In recent years, some states have raised current employees’ required contributions to retirement systems, and others have increased penalties for workers who retire early, according to Stateline.org.
In Massachusetts, Gov. Deval Patrick recently proposed a series of changes to the retirement system that would affect only future employees, according to The Boston Globe. Those changes include raising the retirement age, requiring a larger employee contribution and using a different method to calculate benefits based on earnings.
Chris Quint, executive director of the Maine State Employees Association, said he was encouraged to hear Poliquin say he wants stakeholders to help find a solution.
“He laid out the problem as we’ve all known it for a while,” he said. “I was really pleased to hear he wants all parties to come to the table. It’s our firm belief that all parties, including unions and the members of our organization, need to come to the table.”
House Minority Leader Emily Cain, D-Orono, a former member of the Legislature’s Appropriations Committee, said she and other Democrats are ready to work with Republicans on the issue.
“There has to be a solution,” she said. “But that solution only gets arrived at when we take a look at who’s being impacted and when we take a look at both the short- and long-term implications. This is not a new issue.”
MaineToday Media State House Writer Susan Cover can be contacted at 620-7015 or at: [email protected]