Beyond the Supplemental Budget: What About State Debt, Per Capita Tax Burden, Future Reserves, and the Structural Gap?

Read the full report | Once again the legislature is busy spending the “surplus” that arrives miraculously each year sometime after Christmas, but before the sap flows from Maine’s maple trees. There are a few important points that need to be made about the alleged surplus, from which the Supplemental Budget is derived.

Let us be clear, there is no surplus. Ignored hospital bills, growing unfunded liabilities of the retirement system, and shifted costs to future budgets are more than sufficient evidence of the absence of any surplus. Hopefully, policymakers will look beyond the alleged surplus, and instead, make significant policy changes to stem the expanding structural gap forecast for 2008, as well as the growing mountain of debt.

• The largest state debt is the unfunded actuarial liability owed to the Maine State Retirement System. The short fall is estimated to be $3 billion, with a constitutional requirement to pay down the unfunded liability no later than June of 2028.

• The state of Maine is currently carrying approximately $1.2 billion in an unfunded obligation for health insurance premiums for retired teachers and state employees. In 1999, Governor King created the Retiree Health Insurance Fund to begin whittling away at the unfunded obligation. However, during the 2004 session, this entire fund was spent in supplemental budgets.

• The Maine Governmental Facilities Authority was started in 1998 and allows lawmakers to avoid voter approval for bonding. With a simple majority vote, the Legislature can borrow at will and pass the debts on to future legislatures.

• Under Medicaid, hospitals are paid a provisional interim payment (“PIP”) every month. The backlog of money owed to hospitals at this time is approximately $300 million in state and federal funds. The state share is about $100 million. It should be noted, that the federal funds are available now, but cannot be released until state funds are committed.