Stripping politics from the math of debt

Posted March 29, 2011, at 12:20 p.m.
Last modified March 29, 2011, at 12:59 p.m.
Joshua Hayward
Joshua Hayward

Fellow Mainers, are you as frustrated and tired of political warfare taking precedence over our financial well-being as I am?

It really comes down to simple math, tied up in complex politics and perhaps a sincere lack of understanding of the math by the people in political positions and by those voicing opinion.

In the past couple of weeks I have had coffees and conversations with both sides of the aisle regarding Maine’s liabilities. It is clear that political and ideological gridlock has set in.

On one side are the Democrats who feel that Maine’s liabilities are in better shape than has been stated. They feel that liabilities such as the unfunded pension liability are not really liabilities as they can be solved over time, are implied and are only good faith obligations.

On the other side are the Republicans going crazy over the $12.9 billion in debt that supposedly exists on the overall liability snapshot of the Maine balance sheet. A debt they helped create …

This link to Maine’s Debt shows about $9.5 billion. Then add unfunded health liabilities of some $2.34 billion to get $11.7 billion. Well, who is correct?

Is the state really liable for the unfunded pension liability or is it going to fall to current and future employees to simply increase their contributions and some prayer for market correction to solve the deficit? This deficit, according to the state of Maine, is currently $4.4 billion. I would point out that number is derived using the state’s determined discount rate of 7.75 percent. When you use a rate relied upon by our leading private pension funds you get a future liability far greater and a deficit pushing $11 billion.

You see, we can’t even agree on the liability amount, let alone the way to fix it, nor on the subject of this column today: “Who is responsible to pay the debts?”

What we do know is that our tax dollars will have to be used as contributions to the pension fund in order to even imagine getting it into balance – right or wrong, it must happen. Why? Because both political parties took the money in the past for “general” use!

In recent conversations with leading Dems, they have shared a belief that these liabilities and their negative impact have been overstated. Recently Rep. Emily Cain, House minority leader, shared on her weekly radio guest segment on the George Hale & Ric Tyler show that this and other debts were not really debts.

I have since heard from very frustrated business owners and committed Republicans that say this is simply not correct.

So where do we go with this?

The people — that’s us — need to have definitive answers in order to then drive our elected politicians to represent our selected choices for correction. We don’t need the politicians wasting precious time and energy fighting over who is correct on the math when inherently it should not be a debated item.

Math is and always has been a process of unambiguous outcome. Two plus two is four. Not maybe five because of this or that. This is where we need to be with the math on our state’s income statement and balance sheet.

No more creating vast assumptions and what-ifs. We are out of time and we the people are out of patience.

My proposal is simple. The governor could create a specific task force made up of public participants, party leaders and Treasurer Bruce Poliquin. It would consist of members from both political parties. Its goal would be to work with both caucuses to determine what debts are “owed” and what debts are “implied to be owed” and what their “real” impact is upon Maine taxpayers.

This task force would be charged to leave politics at the door and let the math prove itself. This math will then be offered in an easy to comprehend document to the public for review.

If successful, we could then apply this to numerous public financial concerns.

Joshua Hayward has worked as a financial strategist for 19 years and can be heard Monday mornings at 7 on the George Hale & Ric Tyler Show, 103.9 FM Bangor, 101.3 FM, Augusta. He can be reached at jshayward12@gmail.com

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