Maine State Treasurer Bruce Poliquin warned Tuesday, March 8, that several “high-risk strategies” suggested as solutions to Maine’s $4.3 billion unfunded pension liability could make the problem worse.

At a Statehouse news conference, Poliquin endorsed Gov. Paul LePage’s proposals to raise the retirement contributions of active teachers and state employees from 7.65 percent of salaries to 9.65 percent, while lowering the state’s share by nearly 2 percent, and to raise the retirement age for new hires and nonvested public employees from 62 to 65.

LePage also wants to freeze cost-of-living adjustments in retirees’ pensions for three years then cap them at 2 percent.

Poliquin said there would be no cuts in pension checks under LePage’s plan, no unpaid furlough days and no mass layoffs.

“These reforms should give teachers and state employees more confidence that their future retirement checks will be waiting for them,” said the treasurer.

LePage’s reforms, which Poliquin helped draft, would cut $2.1 billion from the $4.3 billion unfunded liability in the pension plan that covers 30,000 active public employees and 40,000 retired public employees who are not covered by Social Security, if their whole career was spent in public employment.

Asked why he called the news conference, Poliquin said, “I want people to put pressure on the Legislature to solve the problem.”

Mary Anne Turowsky, political director of the Maine State Employees Association, said a bill has been sponsored that would push the deadline for paying off the unfunded liability beyond 2028. It would use a rolling 25-year average for paying off the debt.

“They seem to have rejected everything else except what they want, which is disappointing,” said Turowsky.

Poliquin said the bill is not a wise suggestion.

“This due date, passed by the voters and the Legislature, was already extended once, from 2019 to 2028. Doing so again will cost the taxpayers more by tacking on additional annual payments and will delay putting this fiscal monster to rest,” said Poliquin.

In the last few weeks, public employees have staged several loud protests of LePage’s proposed incursions on retirement benefits and have packed hearings on those proposals by the Legislature’s Appropriations Committee.

Asked if she thinks public employees can sway the Legislature to modify any of the governor’s proposals, Turowsky said, “It’s early in the budget cycle. More actuarial information is coming out this week. We’re always open to having discussions with legislative leaders and the governor.”

Another suggestion Poliquin said he’d heard was borrowing $4.3 billion in pension obligation bonds. He said the state of Illinois tried that in 2003 with disastrous results. He said selling $4.3 billion of 30-year pension obligation bonds would require taxpayers to pay nearly 7 percent interest to attract buyers.

“That’s another $5.8 billion of interest payments over the 30 years that could not be used to invest in our infrastructure or other programs,” Poliquin said. “And the annual rate of return on the new borrowed money must exceed 7 percent for this to work. Who’s willing to make that bet?”

Another idea is shortening the established two-year actuarial valuation cycle.

“This gimmick to capture recent stock market gains, and reduce the pension shortfall and its annual payments, would open up the process to politics,” said Poliquin. “For instance, why not delay the calculation of the pension debt after the investment pool performs poorly, in order to shrink the annual payments for the General Fund?”

Poliquin called doing nothing about the pension fund’s unfunded liability “kicking the fiscal can down the street to the next generation.” He said that would be “irresponsible and risky.”

“The pension payments would continue to grow, draining more and more scarce tax dollars funding core state services,” he said.

“This is a very painful issue for all parties,” Poliquin said. “But it’s real and must be addressed. The challenge is finding the right balance between honoring pension benefits and not running out of money.”

Lowering pension debt will allow the state to lower income tax rates in the future, said Poliquin.