Teacher Pension Shift – legislation revived for 2010

Despite a number of high profile comments by various leaders that a shift in teacher pensions would not be addressed in the 2010 legislative session, Senate president Miller has kept the issue alive by introducing a revised version of that proposal. Senate Bill 959 would shift some cost increases in teacher pensions beginning in FY 2012.

The operative definition in the bill is that of “Local Share,” which is defined (on page 4 of the first reader bill) as follows:

(6) “LOCAL SHARE” MEANS THAT PORTION OF THE TOTAL EMPLOYER CONTRIBUTION FOR LOCAL EMPLOYEES THAT:
(I) EXCEEDS THE TOTAL EMPLOYER CONTRIBUTION FOR LOCAL EMPLOYEES THAT WAS CALCULATED FOR FISCAL YEAR 2011; AND
(II) IS SOLELY ATTRIBUTABLE TO:
1. SALARY INCREASES ON OR AFTER JULY 1, 2010, FOR LOCAL EMPLOYEES; AND
2. THE HIRING OF NEW LOCAL EMPLOYEES ON OR AFTER JULY 1, 2010.

The bill proposes that this calculated “local share” would become a funding responsibility of the local school board, rather than being supported by the State.

This proposal, described by President Miller to county leaders as “modest,” would isolate those costs arising from new hires and salary increases. This marks a substantial change since last year.

The comparable operative section of last year’s bill (Senate Bill 710 of 2009, also introduced by President Miller) read as follows:

(6) “LOCAL SHARE” MEANS THAT PORTION OF THE TOTAL
EMPLOYER CONTRIBUTION FOR LOCAL EMPLOYEES THAT EXCEEDS THE TOTAL
EMPLOYER CONTRIBUTION FOR LOCAL EMPLOYEES THAT WAS CALCULATED
FOR FISCAL YEAR 2010.

The fiscal impact for the 2019 legislation was massive — with counties absorbing some $100 million in additional costs in the first year of effect, and rapidly ballooning up to some $450 million by the fourth year, based on some nominal projections for cost escalation. The amount of the cost shift in the 2010 bill is likely to differ substantially with the prior bill, but is likely to still escalate to a very substantial cost shift from the State to its counties.

MACo has consistently opposed such a shift in costs, citing both the fiscal effect on counties, and the fact that the current State funding of pension obligations was a deliberate decision of the Thornton Commission and its accompanying legislation. Counties have regularly argued that taking this one element of school support in isolation and targeting a “fix” loses its proper perspective amidst an array of school funding formulas and offsets.

SB 959 has not yet been scheduled for a public hearing. The bill will be taken up for a position soon by the MACo Legislative Committee. Senator Miller had been scheduled to meet with MACo’s Legislative Committee during its February 17 meeting, but was unable to attend.

Michael Sanderson

Executive Director Maryland Association of Counties

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