Fluctuations in the stock market and a lackluster economy are conspiring to create a major shortfall in the state retirement system over the next two years. Officials with the Maine Public Employees Retirement System say the costs of keeping the system in the black could reach $480 million dollars a year by 2012. Meanwhile, one accounting analyst says Maine needs to adopt a more responsible method of managing its pension debt and build the true costs of those expenses into its budget process.

A volatile stock market and some State House budget-balancing gimmicks may be the chickens that come home to roost for Maine next's governor and Legislature as they attempt to find nearly $500 million dollars in 2012 to keep the state pension system afloat.

"I don't know what all the solutions are -- possible solutions. I mean we're looking at all kinds of different solutions," says Bruce Hodsdon. As president of the 13,000-member Maine State Employees Association, Bruce maintains a watchful eye on the Maine Public Employees Retirement System, which oversees pension benefits to his members. Representatives of the system have been sounding the alarm about the increasing state costs to keep the pension plan in the black.

A year ago, the fund needed nearly $15 billion to fully cover state workers, but contained only about $8.5 billion. Maine currently has a consitutional obligation to make up the difference by 2028. The state's share of those costs rises and falls with the stock market gains and losses that fund the pension system.

Because Maine's payment on the debt could run $150 million dollars higher in 2012 than was originally anticipated, Bruce Hodsdon is worried that the Legislature could attempt to absorb those additional costs by cutting benefits and jobs for state workers -- which is exactly what lawmakers did in the last budget cycle.

"Obviously state employees are the easy targets," Hodsdon says. "I know a lot of our members do feel like they've given, they've given substantially and consistently to help balance budgets, and you know, they're people who are doing good work at tough jobs and providing real important services to the citizens of this state and are feeling really put upon that they are the easy target and the easy solution."

"It isn't just state employees who should be concerned -- this is an obligation of all of us in the state of Maine," says Maine Democratic gubernatorial candidate Elizabeth Mitchell. Mitchell says that if elected governor, she will work with the next Legislature to ensure the state meets its constitutional obligation.

Mitchell would not speculate on what cuts or tax and fee increases she would consider to close the pension gap, saying that it's important to see how the stock market performs in the coming months.

"We're at a point right now where the stock market has caused problems, not only for the retirement system, but for people all over the country as well as businesses," she says. "I think it's awfully important to think long-term. The stock market goes up and down -- as we know it was down quite a bit, and this past week -- today -- it was up 41 points. So over time, we're hopeful that this will even out."

Eliot Cutler, an Independent candidate for governor, says that rather than wait out the market, Maine's next governor will have to make job creation a top priority in order to close the pension funding deficit.

"I've known for some time, and was talking for the last year, about the ticking time bomb that the unfunded liabilities represent," Cutler says. "Until we restore economic activity to this state, we're not going the have the revenues we need to do any of the things we're obligated to do by the constitution or the things that we want to do as a state."

A call to Republican gubernatorial candidate Paul LePage was not returned by air time.

But at least one budget analyst says Maine's own budget-balancing solutions are as much to blame for the pension deficit as the volatility in the stock market. Sheila Weinberg, founder and CEO of the Illinois-based Institute for Truth in Accounting, says the Legislature's penchant for repeatedly refinancing the pension system's debt over the past 17 years to balance the state budget is a gimmick that doesn't pass the straight-face test.

"Because they use accounting gimmicks in their 'balanced budget' calculations they're able to make these promises," Weinberg says. "It's actually deferred compensation that they're doing, and that deferred compensation should be a cost that is included in your balanced budget calculations, and they haven't been doing that. So that makes it so they're not funding it, and it puts the state into a very precarious position."

According to the Institute for Truth in Accounting, every Maine taxpayer would have to pay an additional $14,600 this year to bail out the unfunded liability of the state retirement system.