You probably haven’t heard much about Question 4 on next month’s state ballot, and when you read it, you’ll see why:

“Do you favor amending the Constitution of Maine to reduce volatility in state pension funding requirements caused by the financial markets by increasing the length of time over which experience losses are amortized from 10 years to 20 years, in line with pension industry standards?”

This is a question for actuaries, not the general public, and it’s not a controversial one at that, which is why it has had such a low profile. There doesn’t even appear to be a partisan divide on this one. The backers – the Maine Public Employees Retirement System – have no funds to run a campaign, and no organized opposition has shown itself.

But just because it’s not a hot-button issue doesn’t mean it’s not worth your attention or your vote. We support this change and urge you to vote “yes” on Nov. 7.

How this question got on the ballot is a long story.

In the mid 1980s, the system to support retired state employees and teachers was the subject of a lot of argument. The amount of money invested equaled only 22 percent of what the state had promised to pay during the lifetimes of all of the plan’s members. That created a huge liability for the taxpayers and much concern for lawmakers.


Since the pension plan is in the state’s constitution, it takes a constitutional amendment to change it. In 1995, voters approved an amendment that committed the retirement system to cover the entire unfunded liability by 2028, prohibited lawmakers from raiding the pension fund for other programs and gave the state 10 years to pay off any additional unfunded liability that was created by investment losses.

This regime was a tremendous success, and gave Maine one of the most solid state pension funds in the country. The fund went from 33 percent funded in 1992 to 80 percent funded in 2016. The value of the fund went from $2.5 billion in 1991 to more than $12 billion last year.

But the road has not always been smooth. When the stock market crashed in 2008, pension investments lost value, increasing the unfunded liability as well as the portion of it that had to be raised from taxes in the next budget. At the same time, the state’s income and sales tax revenues were in free fall because of the recession. In order to balance the budget, the Legislature approved some reforms proposed by Gov. Paul LePage that temporarily froze cost-of-living increases to current retirees and capped future adjustments.

The system was a victim of its own success: When it’s 74 percent funded, as it was in 2008, a 20 percent loss in market value requires a much bigger state appropriation than it would if only 22 percent of what had been promised to employees had been at risk. While no one thinks Maine would be better off with a bigger unfunded liability, the state needs to protect itself from inevitable shifts in the economy.

Which is what Question 4 is all about. Instead of covering the impact of losses over 10 years, the state could spread the payments out over 20 years. That would lessen the shock to the state budget, and make it less likely that a future Legislature would have to renege on promises made to retired public-sector workers.

Comments are no longer available on this story

filed under: