While the Associated Press has distributed coverage of the recent budget proposals from the Senate Budget and Taxation Committee, some of their description — as picked up by many media sources relying on wire services — have errantly described the pension shift proposal, suggesting that the proposal is a trade-off between the two major components of retirement funding for these employees.
The state now pays the entire cost of teacher pensions, but that would change under the Senate committee’s proposal by slowly having counties pick up more of the expense.
In exchange, the state would pick up half the cost of social security, which is now paid entirely by counties.
The second portion of the AP report above is inaccurate. The B&T proposal, passed Friday by the committee and on its way to the Senate floor, would shift a share of pension costs onto local units (school boards, community colleges, and libraries) beginning in FY 2012 — but makes no change to the responsibility for Social Security, which is currently a local responsibility.
The misunderstanding in the AP report likely arises from a component of the pension shift plan, which would set the total local share for all employee retirement costs (including both Social Security and pensions) to an even “50/50” split after the first four years of phased-in local costs. The overall split would (in rough terms) be accomplished by shifting a share of costs of roughly 5% of salary from the State to the local units, and that local share (including all the costs of Social Security and the newly-shifted share of pension costs) would equal the remaining State costs of pension funding.
Further AP coverage of the issue is a fair reflection of the discussion:
However, the change is far more gradual than proposals two Republican senators have made, and changes won’t start at all until fiscal year 2012 under the idea.
Lawmakers have been talking about shifting pension costs for years. Budget strains caused by the recession and rapidly rising pension costs have increased pressure to act. The state spends about $900 million a year on teacher pensions.
“I think it moves us in the right direction,” Sen. David Brinkley, R-Frederick, said, after the panel rejected his proposal to shift about half of the cost back on counties.
The change benefits the state, because teacher pension costs are more expensive than Social Security. By fiscal year 2014, it will result in a savings of about $330 million to the state, under the plan.
The Senate is acting on the budget plan first, then it will go the House for consideration.