The Maryland Reporter recently featured a new report from the Maryland Public Policy Institute (MPPI). As described by MPPI, “The mission of the Maryland Public Policy Institute is to formulate and promote public policies at all levels of government based on principles of free enterprise, limited government, and civil society.”
The report, “Perpetual Shortfall: Maryland’s Pension and Benefit Funds” found that some Maryland county government pension systems have a greater level of funding than the State Pension System and points to the politics of funding pensions as the “root cause” of the issue. As described in the report,
The root cause is that political leaders are unwilling or unable to consistently allocate the required funding for pension systems on an annual basis. State and local budget repeatedly shortchange pension funds for years on end, resulting in large unfunded liabilities. . .
Since the stock market crashes hurt Maryland’s State Pension’s funding levels, Maryland’s General Assembly has passed legislation to reduce the costs of the system by raising employee contributions to 7%, delaying pension vesting from five to ten years, and requiring the last five highest years of salary, rather than the last three, to be used in calculating retirement benefits. This past year, they passed legislation to phase out the corridor method which was leading to chronic underfunding. In 2012, the state legislature transferred some of the system’s costs to county governments, through the Teach Pension Shift.
The Maryland Reporter spoke with the State Retirement Agency about the report. As described in the article,
Told of the major findings of the study, the chief of the State Retirement Agency said much of it was old news. The study disregarded fixes made in pensions for state teachers and employees in 2011, and reform of funding mechanism passed just this year, he said.
“While liabilities are expected to grow in the next few years, based upon all the actions taken, the liabilities are expected to begin declining in FY 2017 and will continue to do so each year thereafter,” Dean Kenderdine, executive director of the State Retirement Agency, said in an email. “The system expects to be 80% funded by FY 2024.”