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May 3, 2011 | last updated December 1, 2011 12:55 pm

State budget hole deepens by $94M

Changes to assumptions related to the state retirement system have added another $94 million to the expected budget shortfall for the next two years.

The retirement system board recently changed demographic and economic assumptions used to generate estimated costs, according to Capitol News Service. The board changed the assumed inflation rate from 4.75% to 3.5% and changed the projected earnings rate on investments from 7.75% to 7.25%. Finance Commissioner Sawin Millet said the changed assumptions impact state appropriations for the public retirement system and the savings estimated to result from Gov. Paul LePage's changes to the system. As part of the next two-year budget beginning July 1, LePage proposed requiring teachers and state workers to increase their contributions by 2 percentage points, reducing the state contribution, freezing cost of living increases for retirees for three years and capping future increases to 2% instead of 4%.

Millet said lawmakers will meet this week to address a change package for the budget in light of the shortfall related to the retirement system and the projected $47 million revenue shortfall announced last week.

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