In addition to collecting a pension, most public employees also participate in Social Security. A few states, such as Maine, never integrated with the program, which means their public sector workers don’t collect Social Security, nor are they subject to the 6.2% payroll tax.
Mary Williams Walsh reports that in an effort to solve their pension underfunding Maine is considering changing its Social Security holdout status. Maine’s state employees would begin paying into and collecting Social Security without having contributed to the system over their working lives. While reducing Maine’s risk of paying for large losses, the move doesn’t address the $4.1 billion hole in Maine’s pension plan (a hole already underestimated since assumes a 7.75% return on assets). And there is the instability of the Social Security program which is projected to begin running a deficit in 2017.
However, integrating with Social Security could be part of a transition to an improved state retirement system. Joshua Rauh explains at the New York Times‘ Room for Debate how the federal government might step in to head off the state pension crisis.