A story released by the Maine Center for Public Interest Reporting last week should give pause to anyone who spent the past budget season or two worried over the loss of teaching positions or cuts to municipal services.
According to the article, the latest economic recession has knocked off track the state’s plan to pay off its obligations to the state employee pension plan by 2028, as required by a constitutional amendment approved in 1995. Since the 2008 stock market crash ruined the rate of return on the retirement system’s investments, the state has fallen behind on its payment plan to the pension fund and, with the deadline looming, the annual payment – at around $290 million now – is expected to balloon to an estimated $700 million within six or seven years.
That would put, as the article points out, 1 in every 5 dollars in the budget toward the pension payment. That’s 20 percent of the budget gone before a single road is paved or textbook purchased.
“It’s a ticking time bomb that the next governor will inherit and that people don’t understand well enough,” Alan Caron, founder of Envision Maine, a nonpartisan Maine think tank, said in the article. “There isn’t going to be enough money to do what we’re already committed to doing, much less doing more of what we should be doing.”
In other words, the money now sent out in the form of revenue sharing and education aid would instead be rerouted to fill the deep hole in the pension system. It’s a situation that would likely make the budget problems of the last two years, which have led to teaching cuts and the loss of curricular and extracurricular programs, pale by comparison.
The report raises a number of important questions, and calls into question the ability of our state government to adequately plan for future events. Why is such a large part of the obligation an unfunded liability, put in place without the means to pay for it? Did no one think to put protections in place, at the time the constitutional amendment was enacted, in case the investment market plunged at some point over the next 30 years? Is there any way around these huge payments that are just around the corner?
Two Legislative committees are now reviewing the issue and looking for solutions, and future articles in the multi-part series will delve into how the state got into this hole and how it may get out.
As the Maine Center for Public Interest Reporting keeps legislators’ feet to the fire, let’s hope lawmakers find answers to a problem that is wholly of our own making.
And let this serve as a reminder that the decisions made in Augusta have far-reaching impacts, some of which are not always immediately apparent.
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