AUGUSTA, Maine — State Treasurer Bruce Poliquin held a State House news conference Tuesday to continue his pressure on lawmakers to address the state pension shortfall, but he was criticized by members of the Appropriations Committee for raising concerns about proposals not even on the table.
“Today the sad reality is that the pension system we have is unsustainable,” Poliquin said. “The $4.3 billion debt is a long-term, structural problem. Not addressing it will cause our budgets to lurch from crisis to crisis.”
Poliquin said Gov. Paul LePage’s proposals are prudent and should be adopted by lawmakers. But the longest-serving member of the Legislature and a member of the Appropriations Committee, Rep. John Martin, D-Eagle Lake, attended Poliquin’s news conference. Martin said there are problems with some of the governor’s proposals and rejected the notion that lawmakers would not address the pension issues.
“This seems more like a political campaign and not an attempt to solve the problem,” he said. “At some time I hope [Poliquin] will sit down and stop playing politics and running for governor again and come up with some usable proposal that would be useful for us in putting together a package.”
Poliquin ran against LePage in the GOP primary, placing sixth in the seven-way race.
Poliquin has endorsed LePage’s package of reforms which would require state employees to pay 2 percent more on top of the 7.65 percent they already contribute from their paychecks to the pension system. The governor’s plan also calls for raising the minimum retirement age from 62 to 65 for workers with fewer than five years of service, and freezing and then capping the cost of living adjustment for state retirees.
LePage administration officials estimate the pension reform proposals will save more than $400 million in the upcoming two-year budget cycle and reduce the current $4.3 billion unfunded pension liability by more than $2 billion.
Martin said a number of the proposals will gain bipartisan support, but not all.
For example, he said he is concerned the proposal requiring employees to pay more into the system while the state will pay less may violate the agreement with the federal government that exempts the state from having to participate in Social Security.
“We need to make sure that can even be done,” he said.
Martin said capping the annual cost of living increase is “big money” in addressing the unfunded liability of the state system, and he believes there will be a cap in the final package.
But Martin criticized Poliquin for calling upon lawmakers to reject “high-risk” solutions to the pension issue. Those solutions, Martin and the Senate chairman of the Appropriations Committee said, are not under consideration.
At his news conference, Poliquin denounced extending the constitutional deadline of 2028 to pay off the unfunded liability, borrowing $4.3 billion in pension obligation bonds to pay off the liability immediately and shortening the established two-year actuarial valuation cycle used to set the expected return the retirement system makes on its investments.
“These options would not solve the pension liability, and could very well make it worse,” Poliquin said. “I would caution all parties to carefully examine these high-risk ideas and to reject them.”
Martin said no one on the Appropriations Committee has given any serious consideration to those options during the lengthy hearings that have been held on the proposals. Sen. Richard Rosen, R-Bucksport, the Senate co-chairman of the Appropriations Committee agreed with Martin.
“I have not heard anyone on the committee, Republican or Democrat, suggest these as a part of the solution,” he said.
Poliquin also warned against not addressing the issue at all in the budget process, telling reporters that some may want to ignore the issues.
“Kicking the fiscal can down the street to the next generation is irresponsible, and risky,” he said. “The pension payments would continue to grow, draining more and more scarce tax dollars from funding core state services.”
Both Martin and Rosen said doing nothing is not an option for the panel.
“The members of the Appropriations Committee are very much committed to making long-term positive impacts on this very large challenge we face,“ Rosen said.
Democratic leaders joined in criticizing Poliquin, saying he is trying to create a crisis that does not exist.
In a release, they said that according to the Maine Public Employee Retirement System reports, the market value of the pension fund’s assets was $10.3 billion as of the last budget year. Based on those numbers, the state retirement system could continue to pay benefits for over 15 years at the 2010 cost level without making any additions to the fund.
They said a Pew Research report released in February 2010 says state pension plans in almost every state are underfunded. Maine, however, was determined to be a “strong performer” when addressing the liability for retiree pensions. The report said the state’s pension obligations were only 63 percent funded in 1997; but by 2008 were 80 percent covered before the market downturn.