An Act To Reduce the Cost of the Unfunded Liability of the State Employee and Teacher Retirement Fund and To Reduce the Cost to Maine Citizens of Purchasing State Bonds
Maine Legislature, Session 123, LD 1654
Committee: Appropriations and Financial Affairs
Sponsors: THOMAS, GOOLEY, AYOTTE, CEBRA, EMERY, JOY, LEWIN, MILLETT, SAVIELLO

Legislative Document 
No. 1654 
H.P.1163 
House of Representatives, March 22, 2007 
An Act To Reduce the Cost of the Unfunded Liability of the State 
Employee and Teacher Retirement Fund and To Reduce the Cost to 
Maine Citizens of Purchasing State Bonds 
Reference to the Committee on Appropriations and Financial Affairs suggested and ordered 
printed. 
Presented by Representative THOMAS of Ripley. 
Cosponsored by Senator GOOLEY of Franklin and 
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Mll...LICENT M. MacFARLAND 
Clerk 
Representatives: AYOTTE of Caswell, CEBRA of Naples, EMERY of Cutler, JOY of Crystal, 
LEWIN of Eliot, McKANE of Newcastle, MILLETT of Waterford, SAVIELLO of Wilton. 
Printed on fel,;yded paper 
Be it enacted by the People of the State of Maine as follows: 
CONCEPT DRAFT 
SUMMARY 
This bill is a concept draft pursuant to Joint Rule 208. 
This bill proposes to accomplish 2 goals. 
Part A would reduce the cost of the 
unfunded actuarial liability to the state employee and teacher retirement fund by 
authorizing the issuance of pension cost reduction bonds by the Maine Municipal Bond 
Bank. Part B would authorize the Treasurer of State to institute a program to make the 
purchase of State general obligation bonds more accessible to Maine citizens. 
PART A 
Pension cost reduction bonds would be issued to payoff part or all of the outstanding 
unfunded liability, currently in excess of $3,000,000,000, the state has to its state 
employee and teacher retirement fund. 
Savings would be realized over time by the 
difference between the interest cost of the bonds and the cost assessed by the Maine State 
Retirement System on the unfunded obligation. The bill would provide at a minimum the 
following elements: 
1. Pension cost reduction bonds are tax-exempt or taxable bonds issued by the Maine 
Municipal Bond Bank. 
2. 
Notwithstanding any other provIsIon of law, the bank may issue up to 
$3,000,000,000 plus financing costs, excluding bonds to refund bonds for the purpose of 
obtaining the economic benefit of reducing the debt service on the outstanding bonds, of 
pension cost reduction bonds, to be repaid solely from funds provided in this bill. The 
bank may issue pension cost reduction bonds pursuant to a resolution to be adopted by 
the bank in the amount and upon such terms as it considers appropriate. The terms of the 
pension cost reduction bonds, their repayment schedule and other provisions to facilitate 
their creditworthiness must be determined by the bank. 
3. Pension cost reduction bonds are not, and may not be deemed to constitute, a debt 
or liability of the State or of any political subdivision of the State, or a pledge of the full 
faith and credit of the State or of any political subdivision of the State, but are special 
obligations of the bank payable solely from the funds and revenues pledged therefor. 
4. Proceeds from any sale of the pension cost reduction bonds must be deposited into 
the Retirement Allowance Fund established in the Maine Revised Statutes, Title 5, 
section 17251. 
5. 
The bonds are to be repaid from certain revenues designated by the State 
Controller. 
6. The Maine Municipal Bond Bank shall establish and maintain a debt service fund 
as a trust fund called "the Pension Cost Reduction Debt Service Fund" into which there 
must be deposited directly money received into the funds designated by the State 
Controller. 
Money in the debt service fund must be held and applied solely to the 
payment of the interest on and principal of bonds secured by the debt service fund as they 
become due and payable and for the retirement of bonds, including the payment of any 
redemption premium required to be paid when any bonds are redeemed or retired before 
maturity or, in accordance with the resolution authorizing the issuance of the bonds, for 
the payment of ancillary obligation; except that, in each month, to the extent there is 
money or funds therein not needed in accordance with the resolution, and subject in all 
II 
respects to the provisions of the resolution, the bank shall withdraw any excess money or 
funds and transfer it to accounts identified by the State Controller. 
7. The Maine Municipal Bond Bank shall create a capital reserve fund to secure the 
payment of the interest on and principal of bonds secured by the reserve fund. 
8. 
As long as there are any pension cost reduction bonds issued by the bank 
outstanding, the State Controller shall transfer immediately to the Pension Cost Reduction 
Debt Service Fund established all sums deposited into accounts designated by the State 
Controller, less costs or administering the programs funded by these accounts. 
PART B 
The Treasurer of State would be authorized to create and implement a program to 
make the purchase of State general obligation bonds more accessible and more affordable 
to Maine citizens. The bill would provide at a minimum the following elements: 
I. At the direction of the Treasurer and based on market considerations, a portion of 
each year's general obligation bond issue would be eligible for the program. 
2. Only Maine residents could participate in the program. 
3. The bonds would be available in denomination as low as $1,000 to make them 
affordable to individuals investors. 
4. No investor could purchase more than $10,000 in bonds from a single issue. 
5. The Treasurer would negotiate with underwriters, brokers and other to make the 
bonds conveniently available for purchase and to reduce any commissions, fees or costs 
charged to investors. Any negotiation should not result in increased costs to the State to 
issued the bonds. 
6. The bonds would be tax exempt. 
7. The bonds would be a pledge of the full faith and credit of the State and would not 
run for a period longer than 10 years from the date of issue.