The Department of Legislative Services, the professional staff of the General Assembly who analyze each State agency through the budget process, recommended that the State shift all the costs of teacher pension unfunded liabilities onto counties—effectively urging that these cuts to counties be doubled from the Governor’s proposal.

This shifts 100% of the State’s unfunded teacher pension liability onto county governments. Counties already pay the employer share costs, which were shifted onto counties in 2012 after deep, difficult negotiations and effectively embedded into each year’s continuing funding requirements for each county.

The “unfunded liability” represents the shortfall of current assets versus the amount needed on an actuarial basis to cover the anticipated stream of future benefits appropriately. The State pension system’s unfunded liabilities are difficult to pinpoint fully. Still, they are most directly attributable to relatively sluggish gains on the system’s investments and the increases in anticipated pension costs attributable to teacher salary increases – primarily driven by State goals in the Blueprint for Maryland’s Future. Neither of these inputs are within county governments’ control, nevertheless State leaders are debating whether to shift part or all of this nearly $200 million shortfall onto counties in the form of annual “invoices.”

The wording in the actual budget analysis of “Aid to Education” is a bit misleading, but the analyst’s presentation and the accompanying table of fiscal effects make it clear—the proposal is to double the amount of the Governor’s proposed 50% cost shift.

Unlike typical analyst recommendations, this issue received no narrative background or rationale – it was merely inserted into the analysis document as a recommendation to amend the Budget Reconciliation and Financing Act (BRFA). At the House Appropriations hearing, Delegate Jeff Ghrist asked if there was a “tally” of all the proposed cuts and shifts onto local governments, and the DLS analyst indicated one could be provided. MACo estimates that with the effects of this proposed cost shift, the potential cuts and shifts onto local governments total roughly a quarter billion dollars annually. If enacted, even in large part, the overall effect will substantially devolve State fiscal crisis into a county fiscal crisis, even while counties already bear the direct costs of the Blueprint mandate (which the State general fund does not yet), their own cost-driven challenges.

Adding insult to injury:

The BRFA already proposes cutting supplemental retirement grants under Aid to Civil Divisions by 50 percent in fiscal 2026 and eliminating them by fiscal 2027. The State initially pledged these grants in 2012 when it shifted a significant share of teacher pension costs to counties. This cut represents a permanent annual loss of $27.6 million statewide, phased in over two years.

MACo will testify on the Budget Reconciliation and Financing Act next week, as that bill contains nearly all of the fiscal effects on counties embedded within the pending budget plan.