March 2, 2011

L.R. 2067 (Governor's Biennial Budget) Testimony

Testimony of Maine Governor Paul LePage Joint Standing Committee on Appropriations March 2, 2011

Chairman Rosen and Members of the Joint Standing Committee on Appropriations and Financial Affairs, I want to thank you for the hard and thoughtful work you are putting into our budget submission. We have high responsibilities to the people of Maine and I respect the approach this panel takes to its work.

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. We also live in a state with finite resources and there is no amount of obligation, wishing or avoidance that will change this hard economic fact.

Without reform, we would need to appropriate $926 Million over the biennium to meet our 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, health care, public safety, and places ever-increasing demands on Maine’s taxpayers who labor under one of the highest tax burden in the country.

The problem today is severe. Ignored, the problem grows to the point where our biennial pension expenses will exceed $1.5 billion by the end of the decade, consuming approximate one-in-every-four dollars in General Fund Revenue. If we let the problem get to this point, Maine’s defined pension benefit program will cease to exist and our promises to retirees will go unmet.

Let me say it again. 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.

There are many factors to blame for our pension shortfall. Poor market performance, higher life expectancies, unreasonable expectations, and growth in government Maine’s taxpayers simply cannot afford.

Our budget proposal takes on our $4.3 billion pension system shortfall and puts us on a sustainable path toward fully funding our retirement obligations. Only then, when the money to pay for our promises is in the bank, we will have truly and honestly kept our promises to Maine’s retired public servants.

Our fix is not easy. But it is honest and it is essential if we want to keep our commitments.

We ask for sacrifice from retirees in the form of COLA freezes and caps.

We ask for sacrifices from current state workers and teachers in the form of higher contributions and later retirement ages.

And we ask for continued sacrifices from taxpayers who for the next seventeen years will have to dig even deeper to pay for the un-kept promises and assumptions of the past.

I appreciate your consideration of our budget submission and my comments today. I welcome your questions.