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OUR OPINION: State's pension plan faces few good options

Morning Sentinel Staff

Maine's leaders are considering plans to help meet the state's long-range obligation to fund its public employees' retirement needs.

But their ideas aren't new -- one in fact, is decades old.

It would shift some of the state's obligation to Social Security, the federal system implemented in 1935 that now covers most public and private workers nationwide.

But 6 million U.S. public employees work outside the Social Security system, a policy that a few states, including Maine and Louisiana, are reconsidering.

Workers, however, may remember reading Social Security is having to cash in some of its Treasury bonds, years ahead of schedule, to pay current benefits.

While that is a direct result of the current recession and may cease once the economy recovers, sooner or later income from the bonds (which must be paid from general federal revenues) will resume as a full-time practice.

That has increased the volume of calls to put the system on a sounder footing by altering Social Security benefits, increasing the amount of total income subject to payroll taxes or raising the retirement age.

Thus, joining it may not seem like the best guarantee public employees could receive to fulfill the pension-fund promises they have received from the state.

Nor is the price associated with such a switch. As Susan Cover reports today, legislative budget-watchers are cool to the notion of increasing the cost of funding retirements for state workers in this period of tightening belts.

But the fact the state's pension fund lost $2.25 billion in 2008, according to a story Wednesday in The New York Times, puts on leaders to diversify the funding sources that undergird their obligation to provide workers with the full amount of their promised retirement income.

The Times said the principal reason the state has met its obligations to date is because only one in five state employees works long enough to draw a pension.

If the state were paying full benefits to all current or past employees, it would have exhausted its retirement funds long ago.

But private workers -- i.e. taxpayers -- are facing the prospect of picking up the tab for state worker retirements due to chronic underfunding and the economic maelstrom of the past two years.

For those who are accustomed to counting Social Security benefits as part of their retirement planning, then, the question might be why the state has waited so long to consider joining a system that requires no commitment to maintain a fund of its own.