Senate Budget & Taxation Committee Approves Pension Shift

During its full committee budget decisions, the Senate Budget and Taxation Committee adopted a plan to shift a substantial share of teacher pension costs onto local boards of education (and to do the same for employees .      The broad outline of the plan was distributed at the decision meeting.

ESSENTIAL FEATURES OF THE B&T PLAN

– The plan would have no effect for FY 2011

– In FY 2012, a share of pension costs equivalent to 1% of salaries for boards of education, community colleges, and libraries shall become the fiscal responsibility of the local units, rather than being fully funded by the state

– This new local share would increase over the ensuing years: 1% of salary in FY 2012, 3% in FY 2013, and 5% in FY 2014 and 2015

– Following the phase-in above, the relative state and local shares (including the locally-supported costs of paying Social Security for these same employees) would be roughly equal

– For years after FY 2015, the amount of funding responsibility borne by the local units would be that required to make the state-county split an even 50/50

A fiscal estimate of this change was distributed by hand only, and is not available in full electronic format. The manually-scanned fiscal estimate is available  here and shows a total effect of over $63 million in FY 2012, ramping up to more than $330 million in FY 2014.

The mechanism of applying the funding responsibility to the units themselves (boards of education, community colleges, and libraries) is different than in other recent proposals. Contrast with the key language in SB 959, introduced this year by Senator Miller:

BEGINNING JULY 1, 2011, ON BEHALF OF THE LOCAL EMPLOYEES OF EACH COUNTY, EACH COUNTY SHALL PAY EACH FISCAL YEAR TO THE APPROPRIATE ACCUMULATION FUND AN AMOUNT EQUAL TO OR GREATER THAN THE LOCAL SHARE OF THE TOTAL EMPLOYER CONTRIBUTION FOR LOCAL EMPLOYEES. (from Page 5 of SB 959)

The one-page description from the B&T plan indicates:

School systems, community colleges, and libraries may chose to deduct the required retirement contribution from their State aid or be billed for the payments.

The implementation of this concept will appear as an amendment to the Budget Reconciliation and Financing Act (BRFA), SB 141. That bill, along with the budget bill itself, will be brought to the floor of the Maryland Senate Monday, with debate expected on Tuesday and into next week.

5 thoughts on “Senate Budget & Taxation Committee Approves Pension Shift

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.