AUGUSTA – The state’s obligation to its public employees’ retirement system is likely to grow by 35 percent or more in 2012, reflecting the weak economy, the head of the system said Wednesday.

Sandy Matheson, executive director of the Maine Public Employees Retirement System, met with editors and a reporter from the Kennebec Journal and Morning Sentinel because she wanted to share facts about the system.

The state’s unfunded actuarial liability — a debt created in the 1970s and ’80s that must be repaid in full by 2028 — was a hot topic during this year’s gubernatorial primaries, she said.

“I hear things being talked about that just aren’t accurate,” she said. “That’s a lot of wasted energy for people.”

In 2011, the state will pay $322 million to the system, which is a combination of the “normal cost” and the amount required to pay down the debt.

The normal cost is the state’s annual contribution to the system; the larger chunk goes toward the unfunded liability.

In 2012, that number could grow to $480 million, which means lawmakers will have to find money in the budget to cover the added cost.

The amount is expected to increase because of stock market losses. The Maine Constitution requires the state to recapture those losses in 10 years.

Matheson called the $480 million debt figure a projection.

“I’m very reticent to let numbers out the door because as soon as you do, something happens,” she said.

For instance, she prepared estimates for the Legislature in April that were thrown off by a 1,000-point drop in the stock market in May, she said.

The Maine Public Employees Retirement System is the nonpartisan administrator for a plan that covers about 70,000 current and retired teachers and state workers. It began in 1942, and took on debt when the Legislature stopped properly funding it in the 1970s and 1980s.

A decade later, the Legislature, backed by Maine voters, amended the Constitution to require that the debt be repaid by 2028.

The state has made good progress since the 1990s, but the effort will be set back by market losses, Matheson said.

“There’s no other way to look at it. There was an (unfunded liability) created. That was a problem that was addressed. Now the market has created an anomaly in this. It’s not the plan. It’s not the employees.”

MaineToday Media State House Reporter Susan Cover can be contacted at 620-7015 or at:

scover@centralmaine.com

 

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