Question 4: Public Pensions

Results

This measure passed.

The gist

This referendum would spread out losses for public pensions over 20 years instead of the current practice of 10 years.

Ballot question

“Do you favor amending the Constitution of Maine to reduce volatility in state pension funding requirements caused by the financial markets by increasing the length of time over which experience losses are amortized from 10 years to 20 years, in line with pension industry standards?”¹

Tell me more

The purpose of this referendum is to spread out the cost of pension plans over time, similar to switching from a 15 year mortgage to a 30 year mortgage. This means you pay greater costs over time in exchange for a lower monthly payment. The industry standard is to spread out the costs over 15-20 years and many similar plans use 25-30 years, so the current practice of spreading out the losses over 10 years is low and results in higher monthly payments than other pension plans.²

Follow the money

The money will be used to

• Savings will occur in the first 10 years of loss.¹

The money will be coming from

• Additional payments will be made in the 11-20th years of loss.¹

Pros

The primary arguments for this referendum are:

• More balanced loss payments
• Reduced volatility in pension funds

Cons

The primary arguments against this referendum are:

• Potentially higher costs over the life of a loss

Further reading

• Full Text
• Ballotpedia Article

References

1. Dunlop, M. Maine Citizen’s Guide to the Referendum Election. Accessed October 5, 2017. ↩ ↩² ↩³

2. Matheson, Sandy. Testimony on L.D. 723 - Resolution, Proposing an Amendment to the Constitution of Maine to Reduce Volatility in State Pension Funding Requirements Caused by the Financial Markets. Accessed October 5, 2017 ↩