MePERS Q & A

Is the Maine Public Employee Retirement System on the verge of default?

In a word...NO

The Maine Public Employee Retirement System assets after the 2008 economic downturn were $6.7 billion. As of the June 30, 2010 valuation, the assets had rebounded to $8.9 billion. Today, the assets are at $10.5 billion, a $3.8 billion or 56.7% improvement.

If the MePERS is financially sound, why is Governor LePage proposing draconian changes to the system?

Ideology

Accounting rules do not allow quick adjustments for movements in the stock market. Hence, the state's short-term obligation is based upon the lower assets of 2008-09, not the rebound. If the economic climate continues to improve and these budget-retirement proposals are adopted, the state would reap a financial windfall at the employees' expense in 2012 when the surge in the stock market is recorded.

Would the proposed increased employee contribution of an additional 2% be used to preserve the retirement fund?

NO

The 2% tax on public employees will be used to reduce the state's payment from 5.5% to 3.9%. In effect, public employee tax dollars will be used to reduce the income tax of private sector employees and fund other programs.

Is the proposed 2% tax on public employees illegal?

YES

Under current law, MRSA Title 5, subsection 17801, paragraph 3 prohibits the increase of employee contributions unless it is used to improve benefits or preserve the retirement fund in times of financial emergency as determined by the MePERS trustees or the recommendation of their actuary. Governor LePage's budget proposal repeals those restrictions because they would block the tax increase.

How much will this proposal cost public employees?

$3 BILLION

Over the two year budget it would cost teachers and state employees $524 million. Over the next 16 years, the employee taxes and rollbacks would save the state $6.48 billion. Some of that would reflect reduced interest payments, but the bulk of the costs come out of public employees and their families to the tune of $3 billion.

Is Maine's spending out of control?

NO

Maine's state spending and public sector jobs have declined in recent years. General fund appropriations for FY 11 are lower than they were in 2005, and adjusted for inflation are below spending levels for 18 of the last 20 years.

Maine's tax supported debt per capita is $760, compared to the national average of $936. As a percentage of income, Maine's tax supported debt is 2.2%, again lower than the national median of 2.5%.

How long has the state had a problem funding the MePERS?

50 YEARS

The issue has been seriously addressed over the last 20 years, with significant progress having been made. In 1987, the MePERS was only 26% funded. Now the MePERS is over 70% funded.