The state’s $12.3 billion public pension plan appears to have withstood some of the economic fallout caused by the onset of COVID-19, the Bangor Daily News reported.
A June 30 report from the Maine PERS (Public Employees Retirement System) showed the pensions for state employees and teachers funded at 83 percent, PERS Executive Director Sandy Matheson said.
That figure is in line with Tax Foundation data from Fiscal Year 2017, which shows Maine ranked 13th in the nation for pension funding, with 82 percent of its plans covered.
The national average for assumed rate of return is roughly 7 percent; Maine’s system registered slightly lower, at 6.75 percent. The lower rate provides some safeguard from potential volatility in the markets and means there are higher rates of contribution from the state. Earnings and declines are stretched out over the course of three years to protect the state from unpredictable market dips.
That timing will mean that this year’s contribution won’t be decided until October, Matheson said. Still, the relatively stable outlook should be helpful next year, when Maine lawmakers confront the 2022-23 budgeting process. A budget deficit of more than $1 billion is projected due to the falloff in sales and other use taxes resulting from government-mandated closures during the pandemic.
While many public pensions lost value when stocks tumbled in the spring, the market has since posted relatively steady gains.
Looking forward, Matheson said the plan’s mature status – which means it has more retirees than workers – will continue to grow, unless there is some attempt at further stabilization.
In referencing the assumed rate of return, Matheson said, “The only strong path forward is to reduce that discount rate.”
Meanwhile, the evolution of the pandemic and its effect on the state’s economy remains uncertain. Maine faces a projected budget gap of $524 million in the 2021 fiscal year.
