Post: Budget Battle Hinges on Pension Shift

The Washington Post’s coverage today of the State budget issues highlights the likely scene coming on the Senate floor, where the budget debate focuses on the proposed shift of pension responsibility from the State to local employers. From their coverage:

But ironically, the issue that most threatens the budget timeline is an amendment that would not affect one penny of state funding in the fiscal year beginning in July. The Budget and Taxation Committee, chaired by Sen. Ulysses S. Currie (D-Prince George’s), on Friday broke with decades of tradition of avoiding a hot-button issue with the state’s teachers and counties. The committee voted to slowly shift a larger share of teachers’ retirement costs to counties, ending a practice of state subsidy for local education retirement costs that Maryland budget officials have warned will only continue to eat up an unsustainable amount of Maryland’s general fund.

Nothing would change for schools and counties in the next budget year under the proposal the Senate will vote upon. But in fiscal year 2012, local boards of education, community colleges, and libraries would have to begin setting aside 1 percent of teachers’ and librarians’ payroll costs for retirement. In 2013, that figure would rise to 3 percent, and in 2014, level out at 5 percent.

Currently, the state sets aside 14.3 percent of every Maryland teacher’s salary to pay for his or her pension costs. Counties pay the teachers’ social security — roughly 7.7 percent of salary — but nothing else toward its workers’ retirement.

With the gradual increase, counties would share an equal amount of such costs by 2015 — and save the state more than $900 million in the process.

As it is, Senate officials have estimated that Maryland will pay about $843 million of its $13.2 billion general fund to cover teacher pension costs in the coming budget year. And that’s not even at a rate that fully funds such obligations. To pay for 100 percent of future teacher retirement costs, Maryland next year would have to set aside $1.2 billion, or nearly the same as what it currently spends to run the entire University System of Maryland.

Several Democratic lawmakers and the state’s teachers unions have already voiced concerns with the proposal, saying it could cut into what local governments can afford to pay much-needed teachers.

If it makes it out of the Senate, the fate of the amendment remains unclear in the House. But some powerful lawmakers who back the proposal warn that if teachers’ unions and counties scuttle the proposal this year, they may be less happy with the next version lawmakers consider following elections in November.

Michael Sanderson

Executive Director Maryland Association of Counties

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