(The Center Square) – Hobbled by a chronically underfunded pension system, Maine was not prepared to weather the economic storm that came with COVID-19, a recent report states.
Analysts with the independent government spending advocacy organization Truth in Accounting recently took the wraps off their annual report, Financial State of the States 2020, which ranks where each state stood economically in the last fiscal year, before the pandemic upended the economy.
In the analysis, Maine ranked in the second half of the country – No. 30 – and earned a grade of “D,” based on an assessment the state “went into the coronavirus pandemic in poor fiscal health” and “will probably come out of the crisis even worse.”
Truth in Accounting’s ranking was based on Maine’s most recent audited financial statements, which, according to the organization, revealed the state had $7.5 billion on hand to cover $10.8 billion in bills.
“The outcome was a $3.3 billion shortfall, which breaks down to a burden of $6,700 per taxpayer,” the report states.
The primary driver behind Maine’s pre-pandemic fiscal challenges is a similar one in a number of other states across the country – unfunded retirement obligations that have accumulated over time.
“Of the $17.5 billion in retirement benefits promised, the state did not fund $2.5 billion in pension and $2.4 billion in retiree health care benefits,” the report states.
While it is next to impossible to speculate on specific revenue losses linked to COVID-19 shutdowns, Truth in Accounting analysts estimate Maine could lose $2 billion from the crisis, meaning other sources – including federal assistance – could be necessary.
In an interview with The Center Square, Sheila Weinberg, CEO and founder of Truth in Accounting, said the financial condition of states such as Maine should serve as a wakeup call to tackle debt sooner, rather than later.
“Nobody was paying attention to it, but now that things are horrible, those governments are having to go to the federal government,” Weinberg said. “They’re asking all taxpayers around the country to bail them out. Everybody needs to pay attention to it.”
While Maine’s unfunded retiree benefits have been a looming issue for years, state officials have made some strides to tackle the gap – a point the organization American Legislative Exchange Council acknowledged in June in the report, “Unaccountable and Unaffordable 2019.”
In the report, ALEC research manager Thomas Savidge singled Maine and Wisconsin out for establishing reforms to retiree pension and health care plans the set a variable scale to contributions based on how well the plan is funded.
“Since 2016, Maine’s unfunded liabilities have decreased by almost $10 billion,” Savidge wrote.
Alaska, which had a $21 billion surplus in its last audited fiscal year, was the best performing state in this year’s report from Truth in Accounting.
New Jersey placed at the bottom of the list, lumbering over a $189.6 billion shortfall in the last fiscal year.