UNFUNDED GOVERNMENT EMPLOYEE PENSION LIABILITIES REFORM

THE FISCAL CRISIS

Like most states and governors, Maine faces a $4.4 billion unfunded government employee pension liability. This massive debt was caused by underfunding in the 1990s and experience changes as well as exacerbated by recent downturns in the stock market. Without reform, Maine taxpayers are projected to pay almost $11.3 billion to the Maine Public Employees Retirement System by the constitutionally mandated 2028. Without reform, Maine taxpayers annual payments are projected to rise from $322 million a year in 2011 to almost $600 mil- lion a year by 2018. The General Fund pays about 76 percent of these skyrocketing costs in our tax dollars. This annual payment could consume almost half of all new General Fund reve- nue, forcing deep cuts to other vital state programs to educate our kids, care for the elderly and disabled, and keep our Maine roads safe.

THE BALANCED SOLUTION

KEEP PROMISES TO RETIREES-NO CUTS IN PENSIONS
Freeze pensions for three years (2011 - 2013), identical to the state employee salary freeze. Ensure reasonable increases in pensions after that, close to the historical norm of 2.8% annually, based on CPI (inflation), but capped at 2% (currently capped at 4%).

AMEND RETIREMENT AGE TO 65 FOR NEW AND RECENT HIRES
Create parity with Social Security (current retirement age of 66, then to 67 in 2027).

MATCH RETIREE HEALTH BENEFITS WITH MEDICARE ELIGIBILITY
Require 10 years of service and age 65 (those retiring after January 1, 2012).

MAKE MORE PORTABLE RETIREMENT BENEFITS FOR STATE EMPLOYEES AND TEACHERS
Currently employees can only keep their share of the retirement contribution (usually 7.65% of salary) when they leave the system. This reform plan increases employee contributions by 2%, allowing everyone to keep a greater share of their total benefit when they leave.

Filed Under : Pensions, Solutions