Across two consecutive budget cycles, the State has added nearly $165 million in annual costs to county budgets through new pension obligations and the elimination of retirement grants.

The total includes $137 million in new annual retirement costs shifted to counties and a $27.7 million loss in annual supplemental retirement grants. The State created those grants as part of the 2012 teacher pension cost shift.

How the 2012 Pension Shift Worked

Before 2012, the State funded employer pension contributions for local teachers. Legislation enacted during the 2012 special session required counties to begin paying the normal cost of teacher pensions, with the new local contributions phased in over several years.

The 2012 package also included Teacher Retirement Supplemental Grants to help offset the impact in jurisdictions facing some of the highest costs. Those grants eventually provided approximately $27.7 million annually to Allegany, Baltimore, Caroline, Dorchester, Garrett, Prince George’s, Somerset, and Wicomico Counties, as well as Baltimore City.

Counties continued paying their share of teacher pension costs under that framework for more than a decade. The arrangement imposed substantial pension costs on county budgets, even though State law governs pension benefits and plan design and counties do not control actuarial assumptions or investment performance.

2025: Nearly $100 Million in New Costs

The 2025 Budget Reconciliation and Financing Act (BRFA) significantly expanded the local responsibility for retirement costs. The legislation shifted approximately $97.7 million in additional annual costs to counties beginning in fiscal 2026.

DLS had recommended shifting the full increase in retirement costs to local governments, which would have roughly doubled the annual impact. The final budget kept the shift at approximately $97.7 million.

The same budget also targeted the supplemental grants tied to the 2012 pension shift. The State cut the $27.7 million program in half for fiscal 2026 and eliminated it for fiscal 2027.

That meant counties faced the pension issue from both directions. The State increased the retirement costs assigned to local governments while phasing out funding originally established to offset the earlier shift in teacher pensions.

2026: Another $39 Million Shift

The pension shift continued during the 2026 session. The BRFA added approximately $39 million in annual retirement costs for K-12 education, community colleges, and local libraries beginning in fiscal 2027.

Once again, DLS recommended shifting 100% of the increased costs, which would have brought the new annual local obligation to roughly $78 million. The final budget kept the shift at approximately $39 million.

With that change now in effect, the two consecutive budget cycles have added approximately $137 million in annual retirement costs to county budgets: roughly $98 million from the 2025 session and another $39 million from the 2026 session.

$164.7 Million in Annual Impact

The two pension shifts add up to approximately $137 million in new annual county costs. Eliminating the $27.7 million supplemental grants brings the combined annual impact on county budgets to $164.7 million.

Counties now pay those additional costs without any new authority over the pension system or the decisions that drive its expenses. They must cover them alongside funding for schools, public safety, roads, infrastructure, and other local services.

The latest shifts also change the arrangement Maryland established in 2012. The State has substantially increased counties’ pension obligations while eliminating the funding it originally provided to offset the first teacher pension shift.

As the 2027 General Assembly session approaches, counties cannot continue absorbing cost shifts, new mandates, and other obligations without the resources or authority to pay for them.