In a letter directed to Howard County agencies and budget staff, County Executive Ken Ulman has called for the county to brace for the dire potential costs of a state shift of pension costs. From the County Executive’s letter:
Dear County Employees,
Governor Martin O’Malley’s proposed FY 2013 state budget contains extremely detrimental consequences for Howard County, and we must begin planning for its impact immediately.
The Governor has called for an abrupt shift of teacher pension responsibilities from the state to local governments, ending eight decades of precedent and sending an obligation to the county that recasts our fiscal condition.
For Howard County, the shift will mean $17.2 million in unforeseen additional expenses for FY 2013, with costs rising rapidly in subsequent years. Our budget office and others have raised significant questions about whether proposals from the Governor to offset some of the cost will prove to be helpful. Regardless, approval of those revenue measures by the General Assembly is far from certain.
The $17.2 million in additional expense exceeds the estimated revenue growth we had been preliminarily projecting in the upcoming budget year. In addition, the bill for this new responsibility is coming directly to the County government, with no requirement for the Board of Education to absorb any of these costs. In fact, the County is still obligated to increase funding to the Board of Education next year by $5.1 million to meet the Maintenance of Effort obligation.
Based on the prospect of this proposed budget shift, earlier this week, I asked each department head to prepare a contingency budget proposal for FY 2013 that includes a 7% reduction in expenses. I have also put back into place a more stringent conditional freeze on new hires and am requiring all departments to eliminate non-essential travel, training, and discretionary expenditures. We have also suspended negotiations with collective bargaining units that have yet to reach a contract agreement for the coming year.
I realize that a 7% budget reduction will have a drastic impact on our ability to provide the level of service that Howard County residents and businesses have come to expect. Consequently, many of the goals we shared for next year are at risk.
You have made many sacrifices during the past several years as the nation has grappled with the worst economic downturn since the Great Depression. Although we were beginning to see the light at the end of the tunnel, any relief provided by an improving economy could be erased in a single stroke by the proposed shift in teacher pension costs. We had hopes for continued avoidance of furlough days, but that may no longer be possible. Unfortunately, we will likely have to consider the possibility of pay cuts and layoffs if the Governor’s budget passes as proposed.
Please know that I am, and will continue to be, a strong opponent of this shift. I am working with my counterparts across the state, and I am in contact with members of the Howard County legislative delegation and others in Annapolis to do all I can to eliminate this proposal. When I took office 5 years ago the state provided the County with $30 million in annual aid; last year we received $4 million. That’s an 87% reduction. It has been challenging to absorb the cuts we have already sustained. If the County were forced to absorb the costs of teacher pensions as well, the effects on county government and its employees would be devastating.
Thank you for all your work under the trying conditions of the last few years. While we must prepare for the worst, I remain hopeful that teacher pension costs will not be shifted to counties. I will continue to fight to protect Howard County Government and our employees.