Ranking Maine’s Debt Burden
Everywhere you look it seems someone is talking about debt today. The federal government is running its debt levels to heights never seen before in a peacetime economy. Maine’s policymakers are also considering more debt to create jobs and rebuild infrastructure. The justify this discussion by noting that Maine’s debt burden is relatively light compared to other states.
Oh, really? The New York Times recently ran a story on exposing the real story behind state debt. It turns out that most state debt is hidden behind a wall of non-transparency known as the state pension system. It turns out that states have not been honest with taxpayers by using unrealistic assumptions in calculating their pension liabilities “Enron style.” The end result is that reported pension liabilities may be as low as one-third of actual liabilities.
In the accompanying chart to the NYT story, it shows that Maine’s general obligation debt plus the unfunded pension liability as a percent of Gross Domestic Product is the 11th highest in the country. I would not call that a “relatively light” debt burden.
The real story for Maine is why are policymakers focused on taking on new debt when they clearly should be 100 percent laser-focused on controlling run-away pension liabilities. In fact, as I pointed out in a recent op-ed in the Sun Journal, the state wants to restore recent pay cuts which will not only increase current expenditures but also further add to the pension liability.