The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2015, the most recent date for which an actuarial valuation is available, Maine's pension system for teachers is 84.6 percent funded, an increase of 7 percentage points since NCTQ's last report. Its current pension debt exceeds $6,800 per pupil throughout the state. It also has an amortization period of 13 years. This means that if the plan earns its assumed rate of return of 7.25 percent and makes its full actuarially determined contribution payments, it would take the state 13 years to pay off its unfunded liabilities. The state's system is financially sustainable according to actuarial benchmarks.
In addition, Maine commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 13.01 percent is high. The rate is determined by the Maine constitution, Maine statutes and the system's funding policy, which mandate employer contributions to be the normal cost plus periodic payments sufficient to fully fund, on an actuarial basis, the State Employee and Teacher Retirement Program by the year 2028. While this rate allows the state to pay off liabilities within the required 30-year period, it does so at a high cost, precluding Maine from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate to the defined benefit plan of 7.65 percent is reasonable given that teachers are not also required to contribute to Social Security.
Maine Public Employees Retirement System, Comprehensive Annual Financial Report as of June 30, 2015.
Ensure that the pension system is financially sustainable.
The state would be better off if its system was over 95 percent funded to allow more protection during financial downturns. However, Maine should consider ways to improve its funding level without raising the contributions of school districts and teachers. 4wImproving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
Maine did not respond to repeated request to review this analysis.