Treasurer Breaks News at MACo: AAA Bond Rating Reaffirmed

In State Treasurer Nancy Kopp’s initial comments to the MACo Legislative Committee on July 14, 2010, she shared the good news she had learned earlier that morning – all three rating houses reaffirmed Maryland’s AAA bond rating.  She said “this is significant, will not only allow the State to borrow money for building projects at lower interest rates, it is recognition of good public fiscal management.”  She added, “The rating agencies noted that Maryland has many strengths, a diverse economic base, well-educated labor force and the on-going influx of well-paid BRAC jobs, to name a few.  But they also noted outstanding issues, in particular the unfunded liabilities of the state employees’ and teachers’ pension system and OPEB.”  Acutely aware of these problems, the General Assembly created the Public Employees’ and Retirees’ Benefit Sustainability Commission this past session.

The creation of the Sustainability Commission was a budget compromise to study and make recommendations on all aspects of State-funded benefits and pensions provided to State and public education employees and retirees – including an evaluation of the appropriate levels of contribution for the employer and employee and an evaluation of the Senate’s pension proposal from the session.  Treasurer Kopp said that “many people do not realize that this group is also charged with looking at current State employee health benefits, since both active employees and retirees are part of the same health benefit system.”

Treasurer Kopp believes that appointments to the commission will be made soon, and the group will begin meeting in August.  She anticipates that the group will meet regularly and that there will be a process for input from interested parties.  An interim report is due December 2010 for consideration during the 2011 General Assembly session, and it is the intent of the General Assembly that recommendations begin to be implemented in fiscal 2013.

Treasurer Kopp noted that, by its very name, the Commission is focused on sustaining a system of benefits for the public workforce, not on terminating them.  She stated that, regarding funding of teachers’ pensions, she hopes all parties will present to the Commission in an objective manner responding to this question: “How do we assure retirement benefits that will attract and retain a strong teaching workforce, acknowledging the constraints of public budgets?” And she said she hoped that the discussion would be in the context of total compensation – both salary and benefits”.  In terms of benefits, she said, “If you are going to share in contributing to the benefits, you should have a say in what the benefit structure looks like.”  She continued by observing that “…all parties have the responsibility of making the public aware of the actual costs of the system and not exaggerate the problem.”

“Remember,” she closed, “the typical state employee salary is between “$47,000 and $48,000 a year, and the typical retirement benefit is $20,000.”

In her comments, she also briefly touched on school construction.  Both the Governor and legislature seem to support continuing a set target, and the Governor promised $1 billion, if reelected.  She said, “School construction is a wonderful thing.”

She also reflected on recent revenue projections, noting “the last couple months have exceeded our projections,” and suggested that despite the still weak economy, that “next year may be a little bit better than we anticipated earlier.”

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