This proposal would authorize an amendment to the Constitution of Maine to extend the maximum period of time over which net losses in the market value of the State-funded retirement plans administered by the Maine Public Employees Retirement System must be retired or funded. That period is now 10 years, and this amendment would extend it to 20 years.

The Maine Public Employees Retirement System (known as Maine PERS) is the pension system that provides retirement benefits to all state employees and public school teachers. Those employees do not contribute to Social Security and do not receive income from Social Security when they retire.

The Constitution requires the State to fund the "normal cost" of all retirement and ancillary benefits provided to system participants annually "on an actuarially sound basis." If there are net losses in the market value of the retirement system's investments that would create an "unfunded liability" - i.e., a situation in which the benefits that the system is obligated to pay would exceed the capacity of the fund - then those net losses (referred to as "experience losses") amortized over a specified period of time must be replenished by the State through general fund appropriations or other means in the state budget. Experience losses are currently amortized over a 10-year period under a constitutional amendment adopted in 1995, when the retirement plan for state employees and public school teachers was funded by the state at a much lower level than it is currently. Having a larger state fund means that the obligation to recover market losses over a 10-year period can trigger a much greater dollar effect on the state's annual budget. Under this amendment, the obligation to retire unfunded liabilities caused by such losses would remain the same, but the financial impact on the state's annual budget would be reduced by paying back the net losses over a longer period of time. The change in the amortization period from 10 to 20 years is thus intended to smooth out the effects of volatility in the marketplace in a manner that is consistent with accepted actuarial practices.