Finalizing a budget for Harford County Public Schools is difficult in the best of times and these are not the best of times.
Like all public school systems in Maryland, Harford County Public Schools depends upon state and local government for revenue and must negotiate its largest expense, employee compensation, with a number of employee unions. Given that government funding and labor contracts are loaded with variables and determined on different schedules, putting together an operating budget of nearly half a billion dollars is vexing enough. Planning for next year’s budget is even more so, thanks to a few new wrinkles on the horizon.
Wrinkle #1 – Labor Relations
The Maryland Public School Labor Relations Board (PSLRB) has the power to issue binding decisions when, after several tries, a local school board and an employee union can’t come to terms. Whether or not the PSLRB can compel a school board to fund salary increases in a tentative contract negotiated before funding levels were determined, is a matter of some dispute. Since the PSLRB is newly established and has yet to issue such a decision, only time, and perhaps a trip to court, will tell.
This year, Harford County has a good shot at being a test case for decisions by the PSLRB. The Harford County Education Association, representing 3,200 employees, and the Harford County Board of Education have not found common ground on a contract for the current school year. The teachers’ union says the school board has money to fund salary increases – the tentative contract agreed to last January included a 3% cost of living increase – but the school board didn’t get money requested from county government to pay for the raises. If the school board is ultimately ordered to fund teacher raises and the ruling sticks, the money would have to come from somewhere. That could mean cuts to other areas of the school budget with a ripple effect into next year.
Wrinkle #2 – Maintenance of Effort
In Maryland, local governments are required to fund their school systems each year, at a minimum, at the same amount per pupil as the previous year or risk future increases in state education aid. Known as Maintenance of Effort (MOE), this funding level is often exceeded when times are flush but in the economic downturn some county governments have gotten MOE waivers from the State Board of Education. As the lean times continue, the Maryland Association of Counties plans to push for changes to MOE, adding another uncertainty in an already uncertain year thanks to Wrinkle #3.
Wrinkle #3 – The Pension Shift
Gov. Martin O’Malley has proposed shifting a portion of the cost of teacher pensions from the state to the counties beginning next year. The State of Maryland currently pays 100% of the pension contributions and some kind of cost sharing has been threatened for years. This time the shift may happen, although the Governor’s proposal is still subject to the vagaries of the state legislature.
Gov. O’Malley hasn’t proposed shifting the full burden but rather a 50/50 split and even then, his proposal eases in with a number of offsets for next year. If all the offsets are approved by the 2012 Maryland General Assembly, the pension shift is expected to cost Harford County $1.3 million next year. Without the offsets, the shift will cost Harford County $8.3 million.
Also up in the air is whether or not the pension costs will count toward the required Maintenance of Effort. If a portion of required county funding for education is diverted to pay for teacher pensions, local school boards will feel the pinch. If the counties have to pay for teacher pensions plus MOE, the effect of an $8.3 million pension shift to Harford County next year will be “catastrophic”, according to County Executive David Craig.
Harford County Executive Craig Speaks Out on Gov. O’Malley’s Plan to Shift Teachers Pension Costs to County Governments
In light of the proposal by Gov. Martin O’Malley to shift a portion of the cost of teacher pensions to the counties, The Dagger posed a series of questions about the plan to Harford County Executive David R. Craig. Below is the text of the Q & A.
Dagger: Does the Governor’s proposal indicate whether or not the cost of teachers’ pensions will count toward Maintenance of Effort? If not, how will that be decided?
County Executive Craig: “We have not seen a definitive answer either way, but it is only logical that it should count toward Maintenance of Effort. Pushing the added expense down on the counties will be harmful enough, but not counting the costs toward MOE essentially means that Harford County would have to meet MOE plus $8.3 million next year alone. The effect of that on our budget and on our taxpayers would be catastrophic.”
The three “cost drivers” cited by the Governor in his proposal are pension benefits, the pension system investment returns, and salary increases for teachers. None of these three things are controlled by county governments in any way. Furthermore, the Governor’s argument that pensions should be shifted to counties because the state does not determine pension costs makes no sense, because county governments do not make teacher salary or pension decisions either – local school boards do. County governments are now being asked to pay for something that they had no role in negotiating.
The state seems to want to have it both ways. A common refrain from the O’Malley Administration in presenting this proposal is that the counties need to have “skin in the game” because otherwise the locals will spend willy-nilly when it comes to teacher salaries and benefits. State-mandated requirements as they relate to Thornton and MOE, however, have driven the local share in education costs higher and higher for the last decade. The state now seems to be telling counties that they are spending too much and not enough at the same time.
The state is also ignoring the fact that the size of the workforce also plays a very major role in pension costs. Changing the teacher-student ratio and adding required programs forces the county to fund a larger number of employees.”
Dagger: Are projected county revenues for Fiscal Year 2013 or savings from other areas enough to cover the cost of the teacher pensions or are cuts anticipated?
County Executive Craig: “No. Even if one assumes that the “offsets” provided by the state are real, Harford County would still have to come up with an additional $1.3 million next year to fund teacher pensions. And, at the state’s own admission, these offsets become less substantial or reliable in the out years. But, the figures cited by the state as offsets are dubious at best. For example, $37 million of the $245 million that the state is putting forward as “fiscal relief” for next year is the result of the state waiving the repayment requirement to the Local Income Tax Reserve Fund. But, this was a new requirement that was not to begin until FY 2013 anyway, and as such is not a revenue stream and cannot really be considered cash-in-hand. Finally, all of the offsets assume that the legislature will follow through on each of them by closing loopholes and eliminating tax deductions, which is far from assured.”
Dagger: If cuts are needed, in what areas will they be considered – school funding? furloughs or layoffs of county employees? cuts in services? If cuts are needed, what areas are off-limits, if any?
County Executive Craig: “It is too early to start thinking about what will need to be cut and what is off-limits. Clearly this would put a serious strain on our budget. The costs involved could potentially wipe out the gains we have made through our conservative fiscal policies and places a new burden on our taxpayers.
We are still hopeful that there are enough legislators in Annapolis who understand the gravity of the situation and see the effects that this shift would have on county governments to kill this proposal. My administration will be lobbying hard against this proposal, and will be presenting a unified message with our allies in Annapolis such as MACo.[Maryland Association of Counties]
In this proposal, I liken the state to parents who have stopped giving their children an allowance and are now robbing their children’s piggy banks so that they can continue to spend money on whatever they see fit. Pushing the problem down to the counties does nothing to fix the situation; it is just a way of spreading the misery.”
CE can’t have it both ways either, cry poor and keep cutting the property tax rate year after year while employees and teachers go without pay raises. If counties keep cutting their rates, the state is to assume that they don’t need as much money to run their governments and thus the county can afford to pay for teacher pensions.
C. E. Craig (and many other MD C.E.’s) may not like the Governor’s proposal to shift some of the pension responsibility to the counties, but this proposal has been championed for MANY years by his former REPUBLICAN colleagues in the State Senate. Therefore, this is a Republican idea that Mr. O’Malley has adopted as one of many proposals to achieve a constitionally mandated balanced budget. This is a fact, so please Republicans, don’t beat O’Malley up too much for adopting one of YOUR party’s solutions to goverment. DOWNSIZING, downsizing…..
That is not factually accurate. The pension shift concept has been championed by the leadership in the legislature for the last 10-15 years. Mike Miller and Cas Taylor were the driving forces.
But even if it were as you state, a Republican idea (which it was not), the implication that a Republican County Exec should automatically go along is ludicrous. Shouldn’t we want politicians who buck their own parties in cases where their parties are wrong?
Yes Sarah, My comment IS factually accurate regarding where the idea was initiated AND championed for many years.
And yes Sarah, I would want all politicians to “buck their own party’s” if they thought that their party’s position was wrong!
Nothing I said should have indicated otherwise. Wake up!
So by pointing fingers at the “other side” because of the origin of the idea and saying it was started by the “other side” now makes it a good idea? How about accepting responsibility for the action instead of looking for someone else to blame? If it was a bad idea then I assume its a bad idea now; regardless of who proposes it.
That lame duck POS in Annapolis robbed Peter to pay Paul then blamed the previous knucklehead for the ills of the State. Now he is putting the gun to Paul’s head because of his previous robbery and expecting the taxpayers to put up the ransom money.
CC How does playing the shell game of moving responsibility around amount to downsizing?
I HATE OWE’MALEY
Useless post. You can’t even spell….typical O’Malley basher.
Spelled correctly or not, he certainly hasn’t made it difficult to bash him. He raised the sales tax and the liberals loved him for it, now he wants to raise the gas tax and the liberals will love him for that, spending is still wildly out of control – spending far more that it’s possible to collect, the economy is still limping along and all the while he’s been avidly pursuing the really important issues like in-state tuition for illegals and now gay marriage… things that are so important to all of maybe 0.001 percent of the population of Maryland and of course his elitist prick friends. I wouldn’t trust him to watch my yard sale while I went to pee – but to be fair that goes for any politician.
I don’t have a problem with covering pensions as long as we exempt ourselves from sending money to Annapolis to cover the difference.
Why doesn’t Craig start cutting in his own office . Like the NEWLY hired Asst.Chief of Staff for a salary of $92,000.00 plus salary
I think Craig actually has 5 or 6 people in his admin serving in the same capacity, just with different titles. Give me a bit of time to research and I’ll come up with names and titles.
I don’t think I’m alone when I say this, but Owe’Malley has got to be the worst manager of public money in the history of this state. Hands down. Worst. Just did a quick search – has this man ever worked in his life, or has he just been a politician?
He now wants to tax apps on phone and computers as well as take away the mortgage interest deduction… That is a huge “tax” increase that will further crush the middle class… He is disgusting
He is spanking us all for getting the signatures required to take the in state tuition for illegals to referendum and not supporting gay marriage.
Martin actually wants to tax everything unless it is already taxed. If it is already taxed, he wants to raise the tax on it.
But he has already cut so much that he has no choice.
Oh, really, he actually hasn’t cut the budget? Maryland is one of only 4 states that has been raising their budget? But he said he has cut, cut, cut. That is not true? Why would he tell me a fib like that? Does he think I am that gullible? He does?
Oh, dear. He assured me I was his ‘one and only’ and he would definitely respect me in he morning.
i have a simple, common sense solution to this conundrum: why not have teachers (and all state and county employees) contribute more towards their pensions and healthcare? you know, like us lowly private workers do? the company i work for put a freeze on matching my 401(k) contributions, but i still put in 5% every check. healthcare for my family costs over $600/month just for premiums. and guess what? we survive. we make it work. we don’t go looking for anyone else to take care of us.
The mandatory contribution rate in 2007 was 3%.
Now, the mandatory contribution rate is 7%– more than double.
This applies to most state and county workers, including most teachers and other eligble professional school staff.
Many state and county workers have also not received ANY type of increase since that time, meaning they have taken pay cuts, and for some, furloughs as well.
Nobody should be complaining about the quality of their benefits, their pay, or their mandatory contributions, but I think you have an incorrect picture of the situation you’re talking about that is based on lack of information.
Healthcare contributions vary widely across the State so they can’t really be compared directly. Some government workers have very good plans, and some do not.
Noble – I am aware that mandatory contributions increased, I think it was last year’s GA that passed that. I am also aware that Maryland teachers, on overage, are the 6th highest paid teachers in the country, even without raises or step increases or COLAS or whatever. Obviously public employee benefits vary across the state. So does the education level and talent of the employees, as well as the nature of their positions. If I implied that all public employees were over-compensated, then you misunderstood me. I never claimed to have all the information or all the solutions. However, without doing the math, I can assure you that 7% towards benefits pales in comparison to the percentage that the average private sector employee contributes.
I’m just sayin…
7% is the mandatory contribution for the State pension system only– 2% more than you yourself put into your retirement plan. There is no opt out of it. And if any of them were sensible, they’d be putting away another good percentage into a different retirement plan as well, because depending solely on the State plan is unwise at this point.
Other benefits that are paid for such as healthcare, are paid for at varying rates depending on your jurisdiction and plans.
I think the numbers we’d be looking to compare are the “total compensation” numbers given out by HR departments. That’s about the only fair way to compare between jurisdictions and those with private employment.
I am more skeptical than you appear to be that so many public employees have it made in this regard.
As a fiscal conservative, I support smaller and more effective government. The state should be cutting services and programs. However, I agree with NOBLE. Teachers have willingly paid or been forced to pay more for benefits and pension. I agree with that decision in light of the economic situation. As to the pay point, remember Montgomery and Howard counties bring up the state average for pay. I believe one tops out slightly below 100k and the other one slightly over 100k. I think Harford is in the mid 70’s after about 15 or 20 years. We could always eliminate the pension system for new employees and pay higher salaries. I support education and restructuring the system to attract and retain the best. However, there is always waste to be found in any organization public or private.
-Why doesn’t Harford County properly fund school system employees post employment benefits?
-Why do governments make promises they can’t keep?
-Does anyone care as long as they get theirs?
We own the problems because we created them by choosing poor leaders. Government Spending and over regulation are your enemies. Stop propping them up.
A few things to keep in mind:
1) It is vital that any portion of state employee pension returned to the counties must NOT be part of the school system’s budget. Currently pension is not, and it would be disastrous to our students if this were to change. In other words pension must not be linked to MOE or to any aspect of school system budgeting.
2) MANY studies show that the biggest factor leading to an effective education is a dedicated and professional teacher in the classroom. With this reality, I am sure the citizens and leaders in Harford County would recognize the need to pay teachers appropriately, including funding the pension. If lower taxes is the sole priority, then education in our county will be hurt with the pension transfer. If the transfer is done correctly – if state law is modified to compel counties to appropriately fund MOE and not couple pensions with the school system budget – then everybody wins. The school system will be properly funded, county employees will get the pension they have earned, and the county will dedicate funds without the perceived waste that seems to hamper distribution of funds from the state.
It should be noted that many local districts in PA – often in very fiscally conservative areas – where the school boards levy taxes to directly fund a portion of school operating budgets, have raised taxes this past year in an effort to attract and maintain good teachers for the sake of their kids. Now Harford County will be faced with the same decision. Our school board does not tax, so the question is will the County Council and County Executive make the difficult decision in its place?
Let’s hope they do – for the sake of our kids and their future…
We need the 999 plan where we raise taxes 9% a year for the next three years to raise pay for teacher raises. If the pensions come back to the counties we should raise taxes 13% a year for the next three years.
Many local districts in PA are also facing the wrath of taxpayers who have grown tired of increasing mill rates. Keep demanding increased taxes and you will awaken a slumbering public which will demand greater accountability (i.e. TEA Party).