Governor LePage Testifies on Budget

March 2, 2011

Augusta, Maine � Today Governor Paul LePage testified before the Joint Standing Committee on Appropriations and Financial Affairs regarding L.R. 2067 �An Act Making Unified Appropriations and Allocations for the Expenditures of State Government, General Fund and Other Funds, and Changing Certain Provisions of the Law Necessary to the Proper Operations of State Government for the Fiscal Years Ending June 30, 2012 and June 30, 2013� otherwise known as the Governor�s biennial budget. Wednesday�s public hearing was the third of the week which focused on state employee pensions.

Maine�s unfunded liability to public sector retirees is a fiscal crisis. It�s estimated there is $4.4 billion in an unfunded retirement liability and $2.3 billion in unfunded retiree health liabilities. Without reform, the payment of Maine�s pension liabilities is nearly $450 million in the first year alone of the upcoming two-year budget.

�52,529. That is the number of state workers or teachers who are either in our retirement system or are within ten years of obtaining retirement age. These are long-serving state employees and teachers who are counting on Maine�s pension system to sustain their golden years. Many will receive no social security and very few have the work years left to make other arrangements for their future. We have both a constitutional and moral obligation to save our defined benefit pension system for our retirees,� Governor LePage told Appropriations and Financial Affairs Committee members Wednesday.

In an effort to protect public employees and retirees, Governor Paul LePage has proposed reform that in the long-term will reduce the unfunded pension liabilities by $2.3 billion and reduces the retiree health liability by more than $1 billion.

The Governor�s plan proposes increases in employee contributions to Maine retirement plans by 2 percentage points of salary; would increase the retirement age to 65 for state employee and teacher members of the Maine Public Employee Retirement System who have fewer than five years of service on July 1, 2011; and would reduce the cap on cost-of-living increases on the retirement benefit for members of the State Employee and Teacher Retirement Program, the Judicial Retirement Program and the Legislative Retirement Program from 4 percent to 2 percent effective January 1, 2014.

�Our fix is not easy. But it is honest and it is essential if we want to keep our commitments,� said Governor LePage.

State Treasurer Bruce Poliquin addressed members of the Appropriations and Financial Affairs Committee today as well. �I support the pension reforms in the Governor�s proposed budget. They�re a good balance between honoring promised retirement benefits, and doing what we can afford for the long-term fiscal health of our great State,� said Poliquin. �This fiscal monster was created years ago by those who promised pension benefits without setting aside enough money to pay the bill. Then, the 2008 stock and bond market crash eroded the pension investments, further widening the funding hole. This mess was not created by the 70,000 retired and active teachers and state employees who want to receive their promised retirement benefits. This mess was not created by the other 1.2 million Maine taxpayers who are paying these benefits, and also expect public services like the court system and state police. We must move beyond the blame game in order to tackle this haunting fiscal problem.�

Currently, seven states are considering switching from defined benefit pension plans to defined contribution plans. Those states, according to the National Conference of State Legislatures, are Florida, Kansas, Kentucky, Illinois, North Carolina, North Dakota, and Oklahoma.

Recently released data from the Maine Public Employees Retirement System (MPERS) on pension costs reports, without reform, the State would need to appropriate $926 Million over the biennium to meet Maine�s normal and unfunded liability pension obligations. �That is 15% of our projected General Fund Revenues and crowds out needed spending on education, our social safety net and places ever-increasing demands on Maine�s taxpayers who already labor under the ninth highest tax burden in the country,� the Governor said. �If we do not act, people in this room will be forced to make funding decision so dire that our current state retirement system will have to be cast aside.�

The Appropriations Committee room was at full capacity during the public hearing and the Governor was pleased with how smooth the process went.

�I would like to thank the people of Maine who took the time to come to today�s hearing,� said Governor Lepage. �It�s important that we all have a voice in this process. It is just as important that it is done in a respectful manner, which was demonstrated today. I would also like to applaud the efforts of the Committee for the hard and thoughtful work that is being put into our budget proposal. We have high responsibilities to the people of Maine and I respect the approach this panel takes to its work.�