>> Ric Tyler: From BIW. 

>> Deb Neuman: To BGR. 

>> Ric Tyler: To Baxter State Park. 

>> We've got to take the power back! 

>> Ric Tyler: The George Hale, Ric Tyler Show welcoming to spacious Studio 7A. 

>> Come on! 

>> Ric Tyler: The State Treasurer, Bruce Poliquin. Bruce, welcome back to Blueberry Broadcasting. And welcome back to the George Hale, Ric Tyler Show. 

>> Bruce Poliquin: Well, thank you folks. I really appreciate the opportunity. 

>> Deb Neuman: Great! 

>> Ric Tyler: And I want to introduce you to Deb Neuman, by the way. 

>> Bruce Poliquin: Hi, Deb. 

>> Deb Neuman: Nice to see you. 

>> Bruce Poliquin: Nice to see you, Deb. 

>> Deb Neuman: Needed to get out of Augusta for a day for a little break? 

>> Bruce Poliquin: Well, I live in Georgetown which down in the mid-coast area. And what I do every Monday morning very early is I pack my clothes in the car and I head up to Augusta, and I check into a cheap hotel. And I'm there working from 7:00 in the morning till 10:00 at night, six days a week and for the taxpayers of Maine. I'm just having a ball! 

>> Ric Tyler: How's the family like that? 

>> Bruce Poliquin: Yeah, well. 

>> Deb Neuman: Yeah! 

>> Bruce Poliquin: I have one son who is a freshman in college in Texas, so it's a very good time for me to do this. 

>> Ric Tyler: Okay. Want to talk about Maine's debt. If anyone knows the bottom line in this situation, it's got to be you. You've immersed yourself in it. Everyone's talking about this 4.3 billion dollar pension fund debt that we have that we're trying to reform. But if I asked you how in debt are we in the State of Maine, I'm guessing it's bigger than that 4.3 billion dollar number? 

>> Bruce Poliquin: Yes, it is. I don't. I haven't seen anybody, Ric, to be honest with you really take a look at the overall debt profile of the state. And, you know, it looks like we have about 12.5 billion dollars of debt that the taxpayers in some form or another are on the hook for. Now, they're all different types of debt in our overall burden. But a half-a-billion dollars is what we call general obligation bonds. This is all approved by the voters of Maine. And this is when we borrow for capital projects or land for Maine's future. Whatever it might, the taxpayers have weighed in. And then we borrow that money by selling bonds through the State Treasury. However, we also have about 5.5 billion dollars of what we call authority debt. Now, there are seven independent, or quasi-independent, authorities that have been created by the legislature. Like Maine Housing Authority or the Turnpike Authority and so forth and so on, that issue their own debt. And this is something that I've been very concerned about. None of these agencies are in fiscal trouble. The Treasurer sits on all of these boards. There's only one I do not sit on which is the Turnpike Authority, which I've asked the Governor to appoint me to. But the point is. 

>> Ric Tyler: Now that it's. Now that it's safe. Well, maybe I shouldn't have said that. I'm sorry. 

>> Bruce Poliquin: But the point is if any of these authorities get into trouble, we all know where this would be going. Back to the taxpayers of Maine. So it's my contention and that of the Governor that the taxpayers are ultimately responsible for all this debt. And we're taking a very close look at it. I'll tell you, the part of it, Ric, that you just mentioned that absolutely keeps me awake at night is the 4.3 billion dollar unfunded liability for our teachers. Pension liability for our teachers and our state workers. This is about one-third of our overall debt. It is real, it is very scary. 

>> Deb Neuman: Back to the debt discussion again with the State Treasurer, Bruce Poliquin. Similar to our household debt, there's good debt to carry and there's bad debt to carry. And some debt we often view as an investment. For example, our mortgage debt might be good debt. My credit card debt, not so much. So looking at our overall state debt picture, where's the good debt? Where's the bad debt? Or is what you're doing right now trying to figure all of that out? 

>> Bruce Poliquin: Well, the. It's a really good question, Deb. And there are so many good purposes to fund. For example, at MELA, which is the Maine Educational Loan Authority, these are folks that extend credit or low-interest loans to college kids that want to get their education. And at Maine Housing Authority I'm at here, we're providing low-interest loans to folks who are buying homes for the first time. 

>> Deb Neuman: Right. 

>> Bruce Poliquin: So these are all really good purposes. The concern I have, Deb is how big is big? And none of these authorities have been able to answer one question for me. How big do you want to get? And they just can't answer that. So there is almost an incentive to continue to grow. And what happens is you just want to be fiscally prudent. You want to be fiscally conservative. You want to have a good eye on this such that it doesn't get out of control. For example, one of the problems that we have, as I mentioned a moment ago, is this 4.3 billion dollar unfunded pension liability for our teachers and state workers. Now, that might be construed as an example that has gotten a little out of control. Here's an example. If you look at the annual payments that the taxpayers of Maine have to make to pay for these retirement benefits, they are starting to spike. This next fiscal number the number is 450 million dollars. That is a one-year payment from the taxpayers. This is almost twice what we spend to support our university and community colleges. In ten years one year's payment projected for our pension liability is 850 million dollars. That's 25% of our budget, projected to be 25% of our budget. And it equals what the state spends to support every K through 12 public school in the State of Maine. So these are very big numbers. We have to address them. 

>> Ric Tyler: Can we talk about? With us [inaudible] GHRT Deb in for George this morning, State Treasure Bruce Poliquin. Can we talk about some of the reforms that we know that the Governor LePage and his administration are proposing? We know that you have come out to speak against some of the other ideas that could be out there to try to settle the problem, which some say is just kicking the can down the road, Bruce. 

>> Bruce Poliquin: Yeah. First of all, what we are asking the retirees and the other folks who are still active in the system to do, is to sacrifice. However, you noticed that the government, the Governor's budget does not include mass layoffs. It does not include furlough days going forward. And the pension checks that are received by the retirees will not be touched. But what we are asking them to do is for the next three years forego any cost-of-living adjustment. And then beyond three years we're asking them to cap it at 2%. Now, for those folks who are still working, but are in the retirement system accruing benefits, we're asking them to contribute an additional 2% of the salary to their own retirement. And then for those who have not yet been hired or are not vested in the system, meaning they've not been around for five years yet, we're asking them to retire at age 65 instead of age 62. Now, if you adopt these reforms that are part of the Governor's budget, we will cut that unfunded liability. That pension debt that we have from 4.5 billion to 2.2 billion. And the annual payments we have to make to pay off this debt will be reduced by more than 50%. 

>> Ric Tyler: Okay. If we cut the annual payment by 50%, we go from 4.5 to 2.5. 

>> Bruce Poliquin: 2.2. 

>> Ric Tyler: 2.2. 

>> Deb Neuman: 2.2. 

>> Ric Tyler: I want to make sure that I understand. You're asking them to retire at 65, not 62? 

>> Bruce Poliquin: No. Yes, but those are people, Ric, who are new to the system. Folks who have been around for at least five years can still retire at 62. It's the folks who have yet to be hired, or those who have been working less than five years. Yes, we want them to retire at 65. 

>> Ric Tyler: Okay. What did you hear? Deb, what did you hear from the people around the table when you went to lunch the other day? 

>> Deb Neuman: Yeah. This was interesting. I happened to be lunching with some folks that I just met at that moment random. Random networking. And one of them is a retired teacher, and the other is a current state employee. And they were just very concerned about their retirement and their future. And they were confused about how this is all going to play out, and how it's going to impact their bottom line. Saying things like, you know, I paid into the system. I want what's owed to me. So there was a little bit of confusion in terms of does this apply to new workers coming in to the system or current retirees? Or those about to retire? A lot of confusion. 

>> Bruce Poliquin: Well, it's a very good point. My father is a retired school teacher from Waterville where we grew up. He worked in the system, and was a great public servant for 25 years. So this is close to my heart. But it is what it is. I would like to state, Deb, you know in response to your point. Is that the problem that we face here is not the result of anything that the teachers or the state workers did. 

>> Deb Neuman: Right. 

>> Bruce Poliquin: It's not their fault. 

>> Deb Neuman: Right. 

>> Bruce Poliquin: They just want their retirement benefits and I don't blame them. However, it's also not the fault of the other 1.2 million taxpayers in the state who are paying for these benefits, and simply want there to be enough money left over to educate their kids in the public schools or pave our roads. So we've got to get beyond this blame game, deal with the numbers, and fix the problem. Now, let me give you another point that I'd like to make. If we had 4.3 billion dollars right now, and we could write out a check to the retirement system, we'd be done. We'd invest the money and we'd be done. Now, of course we don't. So we have to make annual payments for the next 18 years until the Maine constitution says this must be paid off. If you add up all of those 18-year annual payments, the number is 11.3 billion dollars. So this is real money. 

>> Deb Neuman: Those are big, big zeros. What about the option that's been tossed around to extend the constitutional deadline to pay this? 

>> Bruce Poliquin: Deb, that would be a very bad idea. I'm a fiscal conservative, and that would be kicking the can down the street. They've done this once before. It used to be due. The due date used to be 2019. They kicked it down the road to 2028 to reduce the payments on an annual basis. But it means that we'll just be draining more money over a longer period of time from where it can go to more productive uses to repair infrastructure and so forth and so on. That is a very bad idea. Also, the bond writing agencies would frown upon that. And the other thing from 30,000 feet if I can mention this, it's so important. Is that we all want the same thing, which is jobs in the state so our kids can stay here. And business people, entrepreneurs, are attracted to states that are fiscally prudent. And if we can demonstrate to them that we are dead serious about addressing this one-third of our total state debt, it'll send a very strong message to business creators that they don't have to worry about coming to Maine, having their services cut or their taxes going up to pay for something that we don't have the courage to address. 

>> Ric Tyler: State Treasurer, Bruce Poliquin, our guest here on the George Hale, Ric Tyler Show. 101.3 against 103.9 Bangor, The Voice of Maine. We have something called the Sarcasm Filter here, Bruce. I'm going to shut it off here for a moment so I can say something. 

>> Sarcasm Filter disable. 

>> Ric Tyler: Well, let's just borrow the 4.3 million dollars. You mentioned the bond house, someone will. Someone will loan our state 4.3 million. We'll borrow it and worry about it later. Kick the can down the, yeah. 

>> Bruce Poliquin: Well, I've got to tell you a great story about that. It's not a great story, but it's very telling. The State of Illinois tried this with disastrous results in 2003. They had a huge, and still do have a huge hole in their pension fund debt. So they borrowed 10 billion dollars by selling bonds to investors. In order to attract buyers, they had to pay 5% interest on those bonds. They then earned 3% interest on the 10 billion dollars they borrowed for the next seven years. So they paid out 5%, they earned 3%. Now they have a bigger problem. They have an additional 10 billion dollars of debt that the taxpayers owe, and they have not solved this unfunded problem. Now, look at what's happening in Illinois. In order to close the budget hole, this past several months they had to raise personal income taxes by 67%. They had to raise business taxes by 50%. Folks are leaving the state, businesses are shutting down, and jobs are leaving. So we do not want to use Illinois as a model for fiscal prudence here in Maine. 

>> Ric Tyler: We've got four minutes here. Want to squeeze on an e-mail that just came in. 

>> You've got mail! 

>> Ric Tyler: Shane has written in. The only problem is that there seems to be a bit of deception going on concerning the COLA, the Cost of Living Allowance. Or so these are Shane's words. The cost of living is going to go through the roof in the next couple of years. Food prices have gone up 60% this year alone, so considering where this person predicts the cost of living is going to go, is it fair to the state employees to take no COLA for the next three years? And then cap future COLAs at only 2%? 

>> Bruce Poliquin: Well, it's a good question. We don't know what the cost of living adjustments will be going forward, because we don't know what inflation will be. I will say if you go back 20 to 30 years, the average COLA awarded to those in the retirement system has been 2.8%. 2.8. So what we're saying is raise it for three years and then cap it at 2%. I can make an argument to Shane, I believe is the fellow's name, that because the job situation is so dire there's no labor pressure on that end of the inflation spectrum. So yes, commodity prices are spiking, but we don't see it in long-term bond rates yet. And the job situation is still pretty dire, so we don't see any wage pressure. 

>> Deb Neuman: So Bruce, where we go from here? 

>> Bruce Poliquin: What we have to do is have courage, Deb. We have to make sure that your listeners are weighing in. They are calling or emailing or writing their legislators on both sides, and telling them the truth. This is a big part of our debt. It has a lot to do with being fiscally prudent and creating jobs in this state. We must address this. We cannot kick this can down the street. And we've got to do what is right. You know, we didn't create this problem. I didn't create it, your listeners didn't create it, and the folks that are in the legislature and the Governor did not create it. However, history and fate have sort of put this in our lap, and we've got to see what we're made of. We've got to look in the mirror and not deal with politics and do what is right for the state. What is right for the state is to fix this problem. 

>> Ric Tyler: There is a big echo in the Hall of Flags. And when a protester, when a demonstrator takes a microphone it makes a big noise in Augusta. And lawmakers do listen. Bruce, who's going to win out in this? 

>> Bruce Poliquin: I think fiscal prudence wins out, Ric, for a couple reasons. Number one is we're out of money. The state is broke, and these annual payments are spiking. And without reforming it, we've got to come up with these funds from other core services. So how would a legislator like to be put in a position where folks are knocking on their door saying, you know, my kids can't get the best education now because we're drawing money away from that purpose to fund these retirement benefits? Look, this is a very painful issue for everybody. But we've got to be real about this. I'm a business guy. A lot of new leaders in Augusta are from the private sector. We're not politicians. We're not looking at the next election, we're looking at doing what is right for the state. 

>> Deb Neuman: We've just got about a minute left. You're heading up to Caribou this morning. 

>> Bruce Poliquin: Yes, I am. 

>> Deb Neuman: What's taking you up there? 

>> Bruce Poliquin: Well, we just love the county. I love it personally. But in addition to that, I'm traveling all around the state, Deb, to make sure that we get this message out. The only way you can solve a problem like this that's so big, is to increase awareness. So we're going up there to meet with a Rotary group and a Chamber group. We're having a little bit of media up there. And I'm a one-man-band taking this around the state. Because until we understand the problem and tell folks to weigh in, I'm concerned that our legislature won't have the courage to address this because this is very painful. 

>> Ric Tyler: We have 20 seconds. I don't know, this e-mail just came in. Laurie just wrote this in. 

>> You've got mail! 

>> Ric Tyler: If it's no one's fault, why not just raise the sales tax? 

>> Bruce Poliquin: Because Maine is the fifth largest, has the fifth largest tax burden in the state. It is this drip-drip-drip over years, Ric. It would put us in a horrible situation, and why we can't attract business investment and jobs. Taxes must go down, not up. 

==== Transcribed by Automatic Sync Technologies ====