A second look | A report from the thick of the legislative session
Pension needs readjusted
- Liability $85M less than expected
- New calculations reflect inflation, future use
After weeks of testimony uncovering additional budget pressures, members of the Legislature’s appropriations committee finally got some good news. The state retirement system needs $85 million less than what lawmakers allocated in the proposed budget.
“That will relieve some of the pressure that we face in the biennium,” said Sen. Richard Rosen, R-Bucksport, the co-chairman of the panel. “People should not take away from the adjustments that we are hearing about today that the enormity of the liability that taxpayers confront and owe has gone away.” The committee is grappling with a $6.1 billion, two-year state budget.
The Board of Trustees of the Maine Public Employees Retirement System changed assumptions used to determine what the state must pay into the system, based on an expected inflation rate and anticipated future use of the system. “The $4.3 billion unfunded liability is now reduced to a $4.1 billion unfunded liability,” Rosen said. “It is an enormous liability that we still confront; we are still seeing a major increase in this budget over last in what we need to pay into the system.”
The board’s adjustments drew several questions from committee members. Rep. Dennis Keschl, R-Belgrade, worried that the inflation rate will be higher than the 3.5% the system assumes. Sandy Matheson, executive director of the system, said the computations are complex and applied to every person in or expected to be in the system. “With the huge changes in the economy, we needed to make sure our assumptions are valid, still,” she said. “Inflation, I believe, has averaged out at about 2.5%, which is why we are comfortable with 3.5%.”
Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the committee, agreed with Rosen that the retirement system change is good news. “However, it does not change the work that we need to do to address how we are going to pay for the increased needs,” she said. “There are a lot of other shortfalls across state government that we still have to address.”
State revenues were $200,000 below estimates in March, but the red ink would have been considerably worse if a one-time estate tax payment of $5.8 million had not been made during the month.
The overall state surplus is now $21.7 million with three months left in this budget year.
Panel acts to fund DMR jobs
- Federal health requirements at stake
- Lack of funding an ‘oversight’
The appropriations committee has given initial approval to a plan that shifts resources within the Department of Marine Resources to continue funding three positions needed to meet federal health inspection standards.
“This meets the need of keeping these marine scientist positions funded,” said Rep. Windol Weaver, R-York, co-chair of the Marine Resources Committee. “We believe this solves the problem.”
The proposed two-year state budget identified funding only for most of the first year. “They made it clear to us two years ago that we had to provide for these positions or we could not sell our shellfish outside of the state,” Senate President Kevin Raye, R-Perry, said of federal regulators. As Senate minority leader two years ago, Raye was involved in negotiations that put together a patchwork of fee increases and fund reallocations to establish the three positions. Failing to fund the positions, which cost a combined $240,000 a year, in the budget was an oversight, he said.
In 2008, the federal Food and Drug Administration sent several letters and e-mails, including formal evaluations of the state monitoring programs, to DMR. In an e-mail to DMR in March 2009, FDA Regional Shellfish Specialist Peter Koufopoulos wrote that the state needed to follow the testing procedures outlined by the agency or face a ban on the export of Maine shellfish. “The long-term fix for the Maine Shellfish Industry is to have sufficient personnel working at the DMR who can adequately perform sampling activities, shoreline survey investigations, data analysis and detailed report writing,” he wrote. An estimated 90% of Maine’s $60 million annual shellfish harvest is sold out of state.
Rep. David Webster, D-Freeport, was among the lawmakers who worked out the original funding package and said the fee increases in that package were meant to be adjusted to fund the positions. But Gov. Paul LePage nixed that approach, telling DMR officials he would not support fee increases and directing them to find the money for the positions within existing resources.
Bill to mandate snowmobile insurance
- Lawmaker says liability a growing issue
- Industry group cites enforcement issues
Snowmobile owners would have to buy liability insurance under a measure now before lawmakers.
“I have heard from people about some accidents where people have been hurt and people have raised this concern with me,” said Sen. Phil Bartlett, D-Gorham, sponsor of the measure. “Snowmobiles are becoming bigger and faster and more and more like cars and they can cause a great deal of damage and the issue is trying to make sure people are protected.”
He said requiring insurance will protect not only those who may be injured or suffer property damage by snowmobiles, but also protect the owner of a snowmobile from a lawsuit. If a person is found to have caused injury or damage, the person’s assets could be subject to a lawsuit if they have no insurance, he said. “This is a benefit to everybody and could save someone from financial ruin.”
Bob Meyer, executive director of the Maine Snowmobile Association, said the measure wasn’t a good idea a few years ago when it was first proposed, and it still isn’t. “Our position is basically that we certainly encourage people to carry liability coverage,” he said. “I can tell you the association owns two snowmobiles and they are very well covered with liability insurance.”
But, Meyer said, a law mandating coverage is almost impossible to enforce. The problems faced with mandating auto insurance are multiplied by coverage of seasonal vehicles like snowmobiles, he said. “We have heard of the stories of people buying the coverage to register their vehicle and going in the next day to cancel the insurance,” he said. “On a policy like the one you would have on a snowmobile, the insurance premium would not even cover the cost of processing people buying and then canceling and then buying insurance again.”
Insurance companies opposed a similar bill in a past session because they feared losing money, not because of claims, but because of the high processing cost, Meyer said. Another concern is that the registering agents — either the state or the scores of municipalities and stores that serve as agents throughout the state — would object to the additional work with no compensation.
It currently costs $41 a year for residents and $89 a year for non-residents to register a snowmobile.
Mal Leary runs Capitol News Service in Augusta. He can be reached at editorial@mainebiz.biz. Read more of Mal’s columns here.
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