On Nov. 7, Mainers can vote to further stabilize the state retirement system that manages public-employee pensions for current and retired state employees and public educators. Question 4 on the statewide ballot is a constitutional amendment. Voting yes will strengthen the Maine Public Employees Retirement System. As longtime members of the Legislature’s Appropriations Committee, we urge you to support Question 4.
It reads: “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 order for this constitutional amendment to appear on the ballot, at least two-thirds of the Legislature had to agree to it. Earlier this year, a bipartisan majority of legislators did just that. Question 4 isn’t about politics. It’s about making a common-sense adjustment to how the state meets its obligation to Maine’s currently working and retired public employees. It’s about good state budgeting.
Question 4 is a follow-up to a similar constitutional amendment Maine voters approved in 1995 to shore up the retirement system. Back then, voters required any investment losses incurred by the system to be paid back within 10 years. At the time, that payback period made sense. The retirement system was only 28 percent funded, so paying back any losses within a decade was achievable without substantially impacting Maine’s two-year state budgets.
Today, the retirement system is 80 percent funded, which makes it among the best-funded retirement systems in our nation. Yet, the system is at risk of becoming a victim of its own success. Consider the impact of the Great Recession. Practically everyone with 401(k) retirement accounts, mutual funds or stocks took big financial hits. The retirement system experienced similar losses.
We all knew it would take a long time to recoup those losses. Yet, when it came to the retirement system’s losses, members of the Appropriations Committee had to figure out how to meet the 10-year payback requirement at a time of quickly declining state revenues. This led to difficult state budgeting decisions, including freezes and cuts to retiree pensions, that continue to reverberate today.
Spreading out any possible future investment losses of the retirement system over 20 years instead of 10 years will help reduce the impact of such losses on the state budget. The 20-year payback period proposed in Question 4 will ensure a sound retirement plan for current and retired state workers and teachers, in a manner that also will ensure the state can meet its obligations for public services. That is why everyone who directly or indirectly counts on public services in Maine or who pays taxes in Maine will benefit by supporting Question 4.
Question 4 began as a bipartisan legislative proposal — LD 723, Resolution, Proposing an Amendment to the Constitution of Maine to Reduce Volatility in State Pension Funding Requirements Caused by the Financial Markets. Sen. Roger Katz, R-Augusta, with whom we serve on the Appropriations Committee, presented it at the request of the retirement system. The many co-sponsors were from both political parties: Sen. Cathy Breen, D-Falmouth; Sen. Andre Cushing, R-Newport; Sen. Rodney Whittemore, R-Skowhegan; Rep. Drew Gattine, D-Westbrook; Rep. Brian Hubbell, D-Bar Harbor; and Rep. Matt Pouliot, R-Augusta.
At a hearing March 12, the retirement system’s executive director, Sandy Matheson, explained that a 20-year payback schedule makes sense for Maine. “The current 10-year provision has served the plan well, but in actuality is lower than the currently recognized actual standards of 15-20 years,” Matheson testified. “While many peer plans continue to use 25-30 year amortization schedules, MainePERS recommends that responsible stewardship of this plan at this point in time is to change its 10-year amortization schedule to 20 years. Our actuary concurs with and strongly supports this recommendation.”
Members of the Appropriations Committee also agreed with that actuarial recommendation, which is why the committee on May 12 unanimously voted LD 723 as ought to pass. The Maine House voted June 5 in support of LD 723, and the Senate did the same July 20. These votes collectively secured the two-thirds legislative support necessary for the proposed constitutional amendment to be put to a statewide vote.
On Nov. 7, please join us in voting yes on Question 4.
Reps. Tom Winsor, R-Norway, and Aaron Frey, D-Bangor, both serve on the Legislature’s Appropriations Committee.