For the next few weeks, The American will comment on the ballot issues facing the voters at the polls on Nov. 7. There are no candidate elections for state or federal office, but there are four questions on the ballot.
Two of those questions — a casino in York County and the expansion of Medicaid — have generated controversy and passion. These will be addressed in subsequent editorials. The other two questions are much less likely to stir emotion — a highway bond and a request to amend the state Constitution to permit the state pension program to better deal with the ups and downs of the stock market. We will today address the constitutional amendment.
Question 4 asks: “Do you favor amending the Constitution of Maine to reduce volatility in state pension funding requirements caused by the financial markets by increasing the length of time over which experience losses are amortized from 10 years to 20 years, in line with pension industry standards?”
In 1994, the State Employee and Teacher Retirement Program was 42 percent funded with assets of about $2 billion. A 1995 bipartisan constitutional amendment mandating full funding was passed by voters with a 69 percent yes vote. In 2016, thanks to 20 years of consistent funding through the state budget process and investment gains, the plan was 80 percent funded with assets of $10 billion dollars. Maine’s funding progress ranks among the dozen best performances over the past two decades.
Normal costs of the retirement program must be funded annually on an actuarially sound basis. Unfunded liabilities created from investment experience losses currently must be retired over a period not exceeding 10 years.
With assets now in the order of $10 billion, any substantial decline in the market would require five times as much contribution from the state annual budget.
The proposed amendment to the Constitution would spread that actuarial calculation over 20 years, reducing the need for any substantial increases in the state budget year to year.
The Legislature overwhelmingly endorsed the proposed amendment to the Constitution with bipartisan votes in both the House and Senate. We recommend approval of Question 4 by the voters.