Latest Pension Reform Plan an Important Step Toward Fiscal Solvency
A plan proposed by the Legislature’s Appropriations and Financial Affairs Committee to reduce Maine’s $4.1 billion unfunded government retiree pension debt provides some needed relief to Maine taxpayers, and is an important step in the right direction toward bringing Maine’s Public Employee Retirement System to solvency
The plan, a rework of an earlier proposal offered by Governor LePage, reduces Maine’s unfunded government employee pension debt to a more manageable $2.4 billion. It includes a three year cost-of-living-adjustment (COLA) freeze, and a 3 percent COLA cap thereafter. COLA increases would only be applied to the first $20,000 in pension income.
Though the plan eliminates a provision included in the Governor’s initial proposal to require a 2 percent increase in government employees’ contributions to their own retirement, the Appropriations Committee’s plan saves Maine taxpayers $338 million during the 2012/2013 biennium alone.
“Although this plan is not a miracle cure, it reflects a commitment by Governor LePage and legislative Republicans and Democrats to defuse Maine’s $4.1 billion ticking pension time bomb,” said Scott Moody, Chief Economist at The Maine Heritage Policy Center. “This plan is a modest, but important first step in bringing our pension debt under control.”
In its plan, the Appropriations Committee also called for a study on pension reform in Maine. This presents another opportunity for legislators to understand the financial crisis our unfunded pension system creates, and will hopefully serve as a catalyst for additional reforms.
“After the results of this future study are published, I think it will become clear that additional and more aggressive action will be needed to protect Maine taxpayers and preserve our state budget,” Moody said.
Although The Maine Heritage Policy Center supports this latest plan to reform Maine’s government employee pension system, the Center will not take a position on other aspects of the budget until the final funding plan is released.
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