Maine’s Next Fiscal Crisis

Even if our state legislature somehow finds the will (and the money) to close a $438 million budget hole this year, a much greater fiscal challenge lurks just over the horizon.  Maine tax payers owe more than $8 billion in unfunded liabilities from just two programs, the State Employees’ Retirement Fund and the Retiree Health Plan. 

While there’s no such legal mandate for the Health Plan, the Maine Constitution requires the Retirement Fund be fully funded by 2028. As a result, our state government must escalate its annual payments from approximately $200 million this year to $700 million by 2015, based on the most recent actuarial projections.

Right now, the Health Plan – which comprises almost two-thirds of the total unfunded liability – has essentially no money to invest and grow and help pay down its “mortgage”.  Current health benefits for state employees are being paid year-to-year “out of pocket” from the General Fund.  The Governor recently raided a $70 million deposit that was earmarked for the Retiree Health Plan and, instead, used the money to address the current budget crisis.  According to the actuarial data, payments of roughly $100 million per year for the next 25 years are required to make the system solvent. 

Our state government is facing the very real possibility of having to find almost $1 billion per year to prudently fund these two programs in the near future.  Worse, there is little evidence of any kind of management plan to deal with this fiscal threat.  Hardly anyone in Augusta is even talking about it.

As I continue to travel the state and meet with voters, this kind of gross fiscal mismanagement has Mainers shaking their heads.  How have our politicians created such a financial mess?  Who’s been minding the store?

Now more than ever, Maine’s next Governor should be a competent manager who not only understands these difficult fiscal issues, but who also has the experience to successfully deal with them.  Career politicians from Augusta and Washington have shown they are unwilling to address these issues until it’s too late.  Maybe they’re too busy looking at the next election.  The voters of Maine have an opportunity to elect a Governor with the qualifications to put our fiscal house in order, and move Maine closer to building long-term prosperity and creating jobs.  They should take it.

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