Maine versus New Hampshire XI: The Battle of Unfunded Pension Liabilities
In my recent study, “The Cost of Doing Nothing: Maine’s Pension Payments are Crowding Out Other Spending,” (pdf) I noted that as Maine’s pension payments grow the budget process will, more and more, be held hostage by factors outside of the state such as the performance of the stock market which affect the asset side of the ledger. To put this into perspective, let’s compare Maine’s pension assets with New Hampshire’s.
In 2010, Maine had set aside $10.4 billion in assets while New Hampshire has set aside $5.2 billion. Assuming they both experience a 10 percent drop in assets, then Maine’s assets would fall by $1.04 billion while New Hampshire’s assets would fall by $520 million. While both states will have to make up this investment shortfall with higher pension contributions, Maine’s taxpayers will be left footing a bill that is twice as large as in New Hampshire.
Of course, the reason why New Hampshire has a smaller asset pool is because they also have a smaller overall pension liability–$9 billion in New Hampshire versus $14.8 billion in Maine. Therefore, the solution to this vulnerability in Maine’s budget process is to significantly reform Maine’s pension system in order to reduce the overall pension liability.
One reform is to right-size the Maine state government workforce which I estimate would save over $200 million annually and a lot more in future pension costs. Another reform is to move from the defined-benefit system to a defined-contribution system (401k). Without these reforms, the uncertainty of the size of the pension payment in Maine’s budgeting process will continue to worsen.
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Posted on Feb 08, 2011
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Posted on Feb 10, 2011
Please, The waste is on the top, not collectors who have been with mta for 25 years or more. Lepage's daughter will make similar money in the same year! Real story is about management waste., settlements paid to good employees for hush money, thefts, pot growing on turnpike, HR director union steward relationship to terminate a maintenance employee and a related affair. Sexual harassment, I could go on and on..
Posted on Feb 17, 2011
The reason New Hampshire has a smaller pension liability is because it has a lot fewer state employees. Also, presumably, converting to a defined-contribution system would have to include conversion to Social Security. Why would we be foolish enough to do this? States have historically hated SS because it requires sending millions of dollars out of state every quarter with the realization Washington has a genuine appetite for other peoples' money. However, the state has a very poor track record for making timely payments to employees' retirement benefits. Are we to assume it would honor matching 401K contributions or are you suggesting only employees would be contributing?
Posted on Feb 25, 2011
Agree with Shawn. The waste is at the top. There are some overpaid administrators who could go and I just bet the real workers could continue to work and thrive without them. Mr. LePage hiring his own daughter just shows where his priorities are. Maybe just maybe her job should be one of those 3,000 jobs cut.