Budget Conference Complete – Pension Issues Go To Study; New Highway User Revenues “Compromise”

The Senate and House Joint Conference Committee on the budget and BRFA concluded its work this morning prior to the floor sessions of each chamber, and expect to have final reports available for decisions on the floor of the two chambers either Friday or Saturday, for a final “up or down” vote with no additional changes possible. While a wide range of issues were at stake, there were two dominant matters with county government effect, and both resulted in a new approach, rather than simply accepting the either the Senate or House approach.

PENSION SHIFT

    Senate action had been: Begin shift of pensions to local employers in FY 2012, approximately $330m shifted by FY 2014

    House action had been: Reject shift, suggest issue needs more comprehensive context

    MACo position: Reject the shift proposal, support taking up broad study of pension system sustainability

    Conference Committee Action
    (Amendment Language)

    Essentially, the Conference Committee rejected the Senate proposal to enact any changes in benefits or funding in law this year, and instead creates a new Public Employees’ and Retirees’ Benefits Sustainability Commission, charged to study the issue and report back before the 2011 session (and again in June of 2011). The Commission will include members appointed by the Governor and the Presiding Officers, and will also include the State Treasurer as an ex-officio member.

    From the amendment language:

    MEMBERSHIP

    (b) (1) Subject to the provisions of paragraph (2) of this subsection, the
    Commission consists of the following members:
    (i.) The State Treasurer, ex officio;
    (ii.) three members appointed by the Governor;
    (iii) two members appointed by the President of the Senate; and
    (iv) two members appointed by the Speaker of the House.

    (2) (i.) In the appointment of members to the Commission, special
    consideration shall be given to individuals who have knowledge of public or private compensation practices, benefits, and financial matters.

    CHARGE AND SCOPE

    (g) (1) The Commission shall study and make recommendations with
    respect to all aspects of State funded post retirement benefits and pensions provided to State and public education employees in the State.

    (2) The Commission shall review and evaluate the recruitment
    practices retention incentives actuarial liabilities actuarial funding method cost drivers, employee contribution rates, and the comparability and affordability of benefit levels of:
    (i) the State Employees’ Retirement and Pension Systems;
    (ii) the State Employee and Retiree Health Benefit Program; and
    (iii) the Teachers’ Retirement and Pensions Systems,

    (3) The review of the Commission shall include:
    (i) long-term estimated increases in the annual required contributions for the State and evaluation of the sustainability of State-only funding of the long-term contribution levels for the current benefit structure; and
    (ii) an evaluation of the appropriate levels of contribution for
    the direct employer of public education employees in the State, including an evaluation of the related provisions of Senate Bill 141 of the 2010 Regular Session of the General Assembly as it passed the Senate of Maryland.

    HIGHWAY USER REVENUES

Senate action had been: Cut local share of transportation funding permanently

House action had been: Phases local share completely back in by FY 2015

MACo position: Support House approach, correct technical issue with county/municipal distributions

Conference Committee Action
(Summary of Fiscal Effects)

The Conference Committee adopted the Senate’s split of funding between the State General Fund and local distributions, meaning the total amount directed to local governments for local road and bridge maintenance will remain indefinitely at very low levels, comparable to those in the current year. However, beginning in FY 2013 the distribution among the local governments is altered, as the share directed to Baltimore City is reduced by roughly $20 million per year, and the share remaining for other local governments is increased by a corresponding amount. County-by-county estimates are not yet available for the proposed long-term funding.

The final plan also abandons the long-standing practice of allocating local HUR funding (to jurisdictions other than Baltimore City) simply on the basis of the location of vehicle registrations and road miles, and now manually sets a split between the county and municipal share, where municipalities will now receive disproportionately more funding than counties. The net effect of this decision is a shift of just over $1 million from county roads to municipal roads.

Both chambers have agreed that transportation funding will be a topic of additional study and attention, and many policymakers have concluded that the multi-year forecasts of these distributions serve only as a “starting point” for further deliberations.

Michael Sanderson

Executive Director Maryland Association of Counties

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