Maryland politicians already reneging on pension reforms
Maryland has one of the nation’s worst-funded state pension systems, with the 10th highest pension debt-to-revenues of any state, according to Moody’s. But Gov. O’Malley and the state legislature are already back-tracking on pension reforms initiated three years ago that sought to raise the pension system’s funding levels by contributing additional money.
In the face of a $238 million projected shortfall in tax collections, O’Malley proposed cutting $100 million out of the additional payments designated to the pension system. The state’s senate has now one-upped O’Malley, reducing the payment by two-thirds, or $200 million. It’s hard to judge which plan is worse. O’Malley wanted to take less but wanted the reduction to be permanent. The senate takes more but will restore the funding by 2019, or so it says.
What’s particularly noteworthy about this move is that Maryland is hardly facing a crushing budget deficit. It’s just that the state’s politicians, like so many in other places, have put a small priority of paying back their pension debt. The latest Maryland budget, for instance, increases wages by 2 percent for state workers, contributes 8 percent more to higher education funding to hold down tuition increases, and offers funds for “health insurance premium holidays” for state workers.
No doubt the state is feeling flush after a banner year of pension asset investing. No, wait, Maryland’s returns, it turns out, were well below the average of other government employee pension funds.
It’s also worth noting that in the new Andrew Biggs report referenced below, the average career Maryland state employee gets retirement benefits equal to 80 percent of final income.
You would think that Maryland’s unions would be screaming about the decision. Far from it. They’re more interested in the dollars today for raises, because they know that the taxpayers will get stuck with the pension bill in the future.
“We’re just happy that we worked together to come to a solution that is going to guarantee long-term stability of the pension system and it’s not going to sacrifice hard-working men and women’s bread and butter today,” said Patrick Moran, president of Maryland Council 3 of the American Federation of State, County and Municipal Employees.
Nothing helps illuminate the continuing risks taxpayers face from the current system of guaranteed defined benefit pensions than the fact that just the slightest blip in tax revenues is enough to send politicians backtracking on promises to adequately finance these pensions, with the grateful acquiescence of union leaders.