Title
Governor John Baldacci's Weekly Radio Address: Maine's Pension System - Saturday, July 31, 2010
Bureau/Division/Agency
Governor
Document Type
Sound
Exact Creation Date
7-31-2010
Duration
00:02:00
Language
English
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Description
Good morning. This is Governor John Baldacci.
This week, we have seen a number of news stories about the pension system for public employees in Maine.
For the most part, the reports have done a good job of explaining the situation.
But as the political season heats up, there will be plenty of opportunity for misunderstandings and misrepresentations.
Like almost every State in the country, Maine has an obligation to pay pension benefits for workers who have retired from government service.
And, like almost every State in the country, the share of the General Fund budget that is necessary to support those pensions is rising.
In years past, the State did not always keep up with its payments to the retirement system, and a large debt developed.
That began to change in 1995 when a Constitutional amendment was passed that requires the pension system to be fully funded.
Since then, Maine has made enormous progress.
In 1992, Maine’s pension system only had 33 percent of the assets it was projected to need. By 2009 through disciplined budgeting, the pension system has reached 68 percent of appropriate funding.
While there’s no doubt that we still have work to do, successive governors and legislatures have taken the issue very seriously.
According to the Pew Center on the States, Maine’s pension system is the healthiest in New England. The group says that Maine is a solid performer in meeting its obligations, even while other states in the region were characterized as needing improvement or having serious concerns.
And we have consistently met our obligations for ongoing expenses and those inherited from 20 years ago.
It hasn’t been easy.
As the pension system obligation has grown, it has required a greater commitment of resources.
In future years, it’ll be even tougher.
And the task has been made more difficult by the recession, which has reduced the pension system’s investment earnings.
Just as individual retirement plans have suffered, so have the investments for the retirement system.
The issue is real, and it is growing.
That’s why we have put into law that 20 percent of any year-end surplus must be dedicated to pay down the obligations of the pension system.
And that’s why during my administration we have always met our current obligations and made payments to reduce the unfunded liability that we inherited.
We cannot take this issue lightly, and we do not.
But at the same time, we should not allow it to be manipulated for political or partisan reasons.
Maine’s pension system is at risk of becoming a proxy for attacks on State workers or government.
In Maine, workers are required to pay more than seven-and-a-half percent of their paychecks into the system, which is more than Social Security requires.
Only one in five workers actually receives full benefits, and nearly half -- 50 percent -- do not qualify for any State pension because they leave their job before five years.
There is not simple fix to meeting this obligation.
Changing the benefits for current or future employees doesn’t change the long-term obligation that had built up over time.
And because Maine pays its current bills as it should and can’t add new benefits without fully funding them completely, changes in the retirement system have been limited.
While Maine has kept its pension system, most private-sector employers have moved to what is called a defined contribution plan.
In many cases, they make contributions to an employee’s personal retirement plan, but it is up to the individual to make investment decisions and to shoulder the risk of those choices.
As any one with a 401(k) plan can attest during this recession, the notion of retiring today can be disheartening.
The market has tumbled, and retirement savings have suffered.
There’s great uncertainty.
And we are all aware Social Security faces many of the same pressures that we face with Maine’s pension system.
In Maine, we’ve worked to reduce our pension costs by dedicating resources – even during this terrible recession – and reducing the size and cost of State government.
Those changes are making a difference.
We’ve also continued to look at reforms in the system that could reduce its cost. In 1993, for example, Maine raised the retirement age for new employees and those with fewer than 10 years of service.
More changes are likely necessary.
But regardless of the difficulties of the task ahead, one thing is certain.
Maine will always meet its obligations to the men and women who have dedicated their lives to our State.
We will take care of our workers, our retirees and those who are most vulnerable. And we will continue to streamline government, make it more efficient and carefully guard taxpayer dollars.
Of that, I have no doubt.
Thank you and have a great weekend.