State Treasurer Addresses State Debt and Unfunded Pension Liability
January 26, 2011
AUGUSTA –State Treasurer Bruce Poliquin held a Statehouse press conference today on the level of overall state debt, and how unfunded retirement benefits for teachers and state employees are impacting the state budget.
“This is what keeps me awake at night,” Treasurer Poliquin said of the multi-billion unfunded pension liability for teachers and state workers. “This $4.3 billion piece of our overall state debt was created by past state governments which promised taxpayer-funded retirement benefits without setting aside enough money to pay the bill.”
In the next fiscal year, the payment on the pension benefit obligation totals $450 million. To compare, the state now spends $260 million to support the University and Community College Systems.
In five years, assuming government spending remains flat, a projected $650 million will be needed to fund the pension obligation—an amount that will exceed the entire budget for Medicaid. The burden grows even further in ten years, when $850 million in pension costs will approach the entire budget for state aid to local schools.
“This unfunded pension liability portion of our overall state debt is fiscally unsustainable,” Poliquin said. “If we do not address this growing problem, our legislators will increasingly have to decide between best educating our kids; taking care of the most needy; and paving our roads; or, paying the retirement benefits for teachers and state employees.”
Poliquin warned that doing nothing soon to solve Maine’s unfunded pension liability will only allow the problem to worsen. States such as Illinois, New York and California have allowed their pension liabilities to escalate to a point where their state fiscal situation is in crisis.
“I want to make this very clear. Maine is not one of those states. Yes, we have a similar problem. But, we can fix it before Maine goes down the path of California and New York,” Poliquin said.
Poliquin explained that solving Maine’s unfunded pension problem will help ensure available funds for core state services. It may also enhance the state’s bond rating and encourage new business investment (and jobs) in Maine.
“Our goal should be to find a way to honor the retirement benefits of teachers and state workers, while also ensuring we can reduce our overall debt and properly fund core state services,” Poliquin said. “It may to be difficult and painful, but we can do this.”