A recommendation by Gov. Martin O’Malley to shift the cost of teacher pensions from the state to county government would cost Harford County an estimated $9.8 million in the next fiscal year, an amount equal to the salaries of 171 teachers or 169 police officers, according to County Executive David Craig.
Craig told the Harford County Delegation in a Feb. 15 letter that the move could result in the elimination of non-educational services in the county budget, employee layoffs, and/or tax increases to meet the new mandate.
Speaking at a press conference held to urge the Maryland General Assembly to oppose the pension shift, Craig said of the Governor’s budget proposal, “Claiming that you are balancing a budget by shifting a cost is disingenuous at best.” He called the teacher pensions “unsustainable” and said that local governments do not determine education salaries, benefits or the size of staff, nor do the counties control the investment of the teacher pension fund, “Stating that county governments have helped cause the problem is totally inaccurate and incorrect.” In fighting the shift, Craig said there should be “no compromise.”
Craig was joined in opposition to the shift by county and school officials including Harford Schools Superintendent Robert M. Tomback, School Board President Leonard Wheeler and Sheriff Jesse Bane.
Claiming that state decisions helped drive teacher pension costs, Tomback said that the schools “stand shoulder to shoulder with the county executive.” School Board President Leonard Wheeler said of the Governor’s budget proposal, “it is one that I reject because it will send us backwards,” adding that it would have a “chilling effect on the survival of our nation and the world…An educated society is going to solve the problems we created.”
Harford County Sherriff Jesse Bane said that the economic downturn had already taken a toll on his budget and, “while I’m being creative, I am struggling to hold the line on crime.” Combined with increases in calls for service, concerns about traffic fatalities and no increases in staff, he said future funding cuts would be “devastating”, adding “I have nothing left to cut but personnel.”
Speaking after the press conference, Craig said that he would not include the cost of the pension shift in his proposed budget for the fiscal year 2013. Craig’s proposed budget is due to the Harford County Council before April 1, which comes prior to the conclusion of the 2012 Maryland General Assembly.
Craig said that if the state budget that is passed during the legislative session includes the pension shift, changes to the Harford County budget for fiscal year 2013 would have to come from later amendments. Craig said he would not use Harford County’s fund balance, a portion of which was used to pay one-time bonuses to all county employees, to pay for the pension shift next year, because the county fund balance was one-time-only money.
Below is the text of a news release from the Office of the County Executive following the press conference held earlier today:
(Bel Air, MD) – – Harford County Executive David R. Craig, joined by the Superintendent of Schools, members of the Board of Education, the Sheriff of Harford County, the director of the Public Library System, fire service leaders, public employee union representatives, and leaders of non-profit organizations, today urged the Maryland General Assembly not to adopt the recommendation of Governor Martin O’Malley to shift the cost of teacher pensions from the State to county governments. The potential first year cost to Harford County would be approximately $9.8 million, which would have dire consequences for the county budget and for every entity that depends upon county funds.
“The Governor frequently reminds us that there are three cost drivers affecting teacher pensions: pension benefits, salary increases, and investment returns. None of these things, however, are controlled by county governments,” County Executive Craig stated. “Rather than forcing counties to share in the funding of a system that is broken and by the state’s own admission unsustainable, the Governor and the General Assembly should address the long-term sustainability of the pension system before asking others to fund it,” the County Executive remarked.
To demonstrate the dramatic difference in cost of such pension matters, County Executive Craig advised Harford County currently pays $7,605,312 for pensions of its civilian personnel. If the legislature decides to shift the cost of teacher pensions to the counties, the new obligation would more than double the amount Harford County spends on pensions.
“The State budget problems were caused by the State, not by the counties. Failure to the State to properly address their fiscal problems instead of passing the buck to the counties is unconscionable,” County Executive Craig stated.
Harford County is joined by counties throughout Maryland, as well as the Maryland Association of Counties (MACo) and the state’s numerous public employee and teachers unions in opposing the governor’s proposal to shift the cost of teacher pensions from the State to the counties. If approved by the Maryland General Assembly, the abrupt shift of teacher pensions would end an 80 year practice and would have dire fiscal consequences to the counties.
In a February 15, 2012 letter to Harford County’s Delegation to the Maryland General Assembly, County Executive Craig urged the delegates and senators to oppose the governor’s proposal. County Executive Craig advised that should the State pass along the cost of teacher pensions to the counties, the immediate impact to Harford County could result in the elimination of non-educational services in the county budget, layoffs of personnel, and/or an increase in taxes to meet the challenge of this new mandate.
Below is the text of talking points made at the press conference today by Harford Schools Superintendent Robert Tomback:
–The Governor’s Budget Reconciliation and Financing Act (BRFA) of 2012 includes a proposal to shift to the counties a significant share of the cost of the state teacher pensions. Senate Bill 152/House Bill 87 shifts a substantial share of teacher pension costs to Harford County.
–Overall the Governor’s proposal would shift approximately $240 million in teacher retirement costs from the State to local governments. The financial impact on local governments, and their capacity and willingness to invest in local school systems in the future, will be enormous.
–It is important to remember that this is the state’s retirement system, so while it is true that the salaries approved locally directly impact the state’s obligation to pay individual retirees their state pensions, it is also true that the General Assembly sets the employee contribution rates, and the multiplier that is used to determine the calculation of all pensions. In addition, the State Retirement Agency makes the investment decisions and administers the program. In other words, it is not only local decisions that drive state retirement costs.
–Also the state’s labor relations law dictates that Boards of Education negotiate contracts with employee unions through a state-dictated collective bargaining process, and must do so in good faith based on available state and local funding. Local boards negotiate salaries and health benefits in the context, but not retirement benefits, which are determined by state law.
–This is also happening at a time when the school system is gearing up to implement additional federal standards under Race to the Top, which is costly to the school system. Furthermore, the General Assembly and the Maryland State Department of Education have not relaxed additional mandates for local school systems.
–HCPS is entirely fiscally dependent on state, local, and federal funding. Funding from these sources has declined in recent fiscal years. If the proposal to shift costs to the counties is worked through the legislative process, it could cost Harford County as much as and estimated $14,712,757 million during a possible four or five year implementation process according to the Department of Legislative Services.
So, this is what it means to “Move Maryland Forward”???….Thanks, Marty. I feel so……so……Progressive…..
Either the State gets more revenue or the County picks up the tab. Your choice. Someone has to pay for services and this State has among the best in the country. We have the best schools and I don’t want to lose that.
PTBL,
Every tax increase and every spending increase has a special interest group behind it whining and crying about who will be hurt, and what crisis is upon us now, and why we need to raise taxes and fund their special deal. If we don’t, then our children will be stupid and homeless, our houses will burn down, our families will be the victims of crime, we will all die because our health care wasn’t funded and those among us illegally won’t have their college education subsidized. That’s just for starters.
This State already has very high taxes and is one of the few states to have the temerity to raise taxes over the past few years. The voters in Maryland are so stupid that they actually believe that while most other states didn’t raise taxes, Maryland is somehow different. The only difference is that our politicans view us as morons that will believe anything. And in the case of the moronic Dem/Libs they are right.
No more taxes.
Let’s also not forget that not only is Maryland among the very best in the nation but the nation is also TWENTY EIGHTH in the world. Countries that are considered “third world” have better education than our kids. Perhaps we should model our system after India’s. What do they spend per child?
That simply is not true.
Brilliant return Ryan. Where do we actually stand in the world today?
Well, since we educate more of our populace than virtually any other country, I don’t really know who would be the valid comparison. Do we need to change and improve, yes. Is it because of bloated cost or teachers’ pensions or a “bad” return on our investment, no. We need to change the priorities of our society in general to focus more on education. That means an increased investment, as well as, an increased commitment on the part of all stakeholders.
Or…. We do away with the extravagant retirement program and do like all of industry has been forced to do.
@Arturo Nasney –
If its not a bloated and unsustainable program requiring increased taxation PTBL will not be in favor of it.
PTBL will never suggest trimming spending or reducing tax burdens on taxpayers.
PTBL believes our economy is of finite wealth neither expanding or contracting only needing proper redistribution.
PTBL takes great joy anytime he can liberate taxpayer’s money and give it to non-taxpayers and government.
S.
Actually, the retirement program is not all that great as compared to other states neighboring Maryland. In my opinion it makes an opt-out program all the more attractive. Why in the world have the legislators not eye-balled yet is beyond my comprehension? If teachers and other public servants desired to pour all their retirement money into 403(b) accounts or like accounts, they should be allowed to do so. It would cost the state far less, remove the issue from political influence, and probably be well accepted. I think sticking with the arcane pension system is a recipe for ruin for the county and state. Perhaps shifting the cost to the county is a wise idea… it may gain traction locally rather than on the state scale.
That’s a decent suggestion, but only going forward. You can’t very well change the game late on people who have been in the mandatory system.
That’s how all/most the changes to the state pension system have been implemented over time, adding new requirements and making changes to people who begin employment after it takes place. One problem is making it optional might also underfund the system even further.
I also don’t feel the system is overly generous. And the last time this was discussed here it turned out that the state system mandatory contribution rate (6 or 7%) was more than the privately employed worker complaining about it was contritbuting to their retirement plan.
Obviously something has to give here, I don’t think there’s a good solution to be had. Nearly all of those government workers haven’t received any type of increase in around 3 years, and many of them actually make less than they did a few years ago, in real terms.
I don’t think it’s fair to change the “deal” made with workers when they take a job, but obviously nobody wants more taxes or less services.
It pretty much sucks for everybody.
It can be phased in, but doesn’t have to exist only moving forward. Employees can be placed into various blocks and offered a buyout. The buyout would be expensive, but also only a one time cost.
For example, an employee in the state pension system making perhaps $50K a year will be paying about $3500 this year at the 7% rate you cited. Suppose this has been paid for 10 years – that would be a $35000 buyout.
The county is facing getting saddled with $9.8 million for pensions next year under proposed legislation. That amount alone would buyout 280 employees (fitting the parameters I laid out). The state/county could budget a sum of money for buyouts for annual buyouts and award the buyout on a lottery for employees interested.
Existing employees and retirees who opt to stay in will be proportionally adjusted. Yes, I believe the option of buying out a pension ought to be offered to retirees as well. The shrinking employment rolls at the county and state level will mean fewer people paying in over the long-term. Thus, the existing retirees are going to be a problem that will only get bigger and the burden falling on fewer people.
Honestly, if they worked the numbers and said this would only work if I got saddled with a one-time tax of $1500 – I would GLADLY pay it to rid the state/county of the expense over the long term. What am I saying? Only $1500… make it twice that and it would still be worth it!
Another reasonable suggestion. I think there are devils in the details that might derail it, but I’m down with the concept.
I’d suggest we make your “one time” tax of $1500 a five year tax increase of $300/year, or .375% (less than 1% increase on $80k/year) to make it more palatable.
Localguy should be Annapolisguy!
I love the idea of a buyout but there is a hugh flaw in your calculations/estimate. As an employee who is forced into this system and is currently paying 7%, I would in no way take a buyout under your scenario. Let’s assume your numbers of $3500 a year over ten years…You would need to pay me my original $35k PLUS THE JUICE. At the very least a conservative portfolio should be returning 7-8%. Any buyout would have to be contributions and interest if it were to work. Any naysayers and crazy educator bashers please research before you bash my 7-8% interest number. There are blue chip stocks and fabulously run MLP’s that are paying more than that and have an extended history of raising dividends so that number is more than reasonable.
Noble,
Let’s not allow ourselves to think that we have only two options – either more taxes or less services.
That assumption means that there is no room for more efficiency and no waste to be trimmed. Even PTBL doesn’t believe that but he does conveniently ignore it. In both State and local government you and I could get rich if they just gave us 10% of what we saved them by stopping the waste and stupidity for them.
Arty,
You said, “We do away with the extravagant retirement program and do like all of industry has been forced to do.”
I am not aware of extravagant retirement pensions for public workers. Can you provide an example of such? Please understand that money used to fund government employee pensions comes from three sources: contributions by the employees themselves, contributions by the government, and investment returns. Historically 60-75% of the funds have come from investment earnings. As Wall Street profits soared to unrealistic levels, state pension earnings grew abnormally and many states took advantage of what turned out to be a temporary windfall and adopted pension programs that could not be sustained.?? Poor management decisions led to unfunded pension liabilities.
These problems grew out of policies established by legislation, regulation and collective bargaining and will need to be reformed through the same processes.?? Additionally, extravagent spending choices by our elected officials helped contribute to this issue by putting our governments in debt or fiscal austerity.
You are feeling something known as “pension envy.” This is when some private sector workers resent that the pensions of public workers enjoy stronger legal protections than those in the private sector. But government workers, many of whom were recruited with the promise of good benefits and pensions, can and should argue it would be illegal — to change the rules in the middle of the game. Also, Gov’t employees do not receive extravagant bonuses every year. On average, Gov’t employees can earn up $1,500 if they are stellar performers. By contrast, I know a Financier (in this area) with a Series 7 License who receives at least $25k +per year in bonus regardless if the customer’s retirement accounts he manages lose money or not. Does that make sense?
Bottom line: a pension of 1% per year of government service, averaged against the combined high 3 year salary earnings is really not much. Example, a senior Teacher with 25 years on the job and an average salary of $80k would earn $20k in pension each year. Pensions should not be the only source of income for retiree. It is up to the pensioner to have been a good saver by putting much money away in their 401k, which is managed by the private sector. Now, getting the private industry to play fairly and by the rules without manipulating markets is an entirely different problem. Hopefully there will be much finance and banking reform during the next presidential administration.
Extravagant retirement program? You have got to be kidding me. After 35 years with both Maryland State government and some of those with Harford County Public Schools, my job was eliminated by Governor O’Malley. I cannot live on that extravagant retirement program even with a house and a car that are both paid for. Oh, and as for scaling back those private sector pensions? Talk to the thousands whose private pensions from Bethlehem Steel about scaling back. You are either uninformed or a fool.
The retirement program is not paid for by taxes. It is paid for by the contributions made by teachers (matched by the State) and the income of investments.
@Proud to be Liberal
The match is paid into the pension is taxpayer funded.
Isn’t that what all employers do?
MD does not have an extravagant retirement program.
Compared to any private sector company, the teacher’s plan is extremely extravagant. The reason that private sector had to go to 401K type plans is because they had to fund retirement plans out of corporate profits. They could not just go to the tax payers and demand a higher amount. It is time for all government employers to do the same.
The state’s pension system doesn’t cost that much or pay that much since its the employees are the ones whom pay most of the funds into the system. Police officers actually pay a higher amount but have other insurance benefits built in too. Judges, elected officials however have quite a sweet deal compared to the rank and file. Its by no means extravagant and the fact that the private sector has moved to 401k plans is irrelevant to the discussion since the pay is greater in the private sector anyway, so private sector gets more money while working. Before you start disputing that fact, please compare like minded skills and abilities in which you will find that private market pays more than govt as such govt becomes a training ground for attorneys, doctors, engineering, science and higher education degree positions. Teachers really are underpaid, over scrutinized and demonized for the problems in the school system, lack of parental responsibility.
FRANKLY SPEAKING: It has been my experience that the people who are most verbal and visceral about “extravagant” public employees’ pensions have a sour grapes reaction because they are: 1. people who do not have a satisfactory pension themselves; 2. Believe, as does Santorum, that educated people are “snobs” who must be beaten down to their level; 3. Are selfish as their children are finished with school and they do not care about younger children; 4. Do not understand the direct correlation between excellent schools and property values (or do not care as they live in an apartment or a trailer); 5. Are so limited in the scope of their thinking they cannot see that a community needs certain services if it is to flourish and succeed (these are the same folks who are always carping about how well foreign countries educate their children.) I will add here that foreign countries do not spend a huge percentage of their educational budget on special needs children.
Jesse Bane, what can I say, the man who keeps everyone employed while being under administrative suspension while waiting months of investigation work. The man who keeps a lot of dead weight in the Sheriff’s office, or who hires retired employees of the Sheriff’s office which comes back and work for the county as a civilian. Those people are double dipping the county’s pay roll.
New expansion at the jail, new precinct and cutting staff is an option? You could get Mark Forwood to be Sheriff, atleast he knows how to make money.
Why doesn’t Uncle Jesse cut the personnel for whom he “created” jobs? He hires people who are worthless and they sit around and collect paychecks that we are paying for. That is the truth and not just heresay. Scratch his back with a few campaign dollars and he’ll take care of you. Perform your job well enough to gain national recognition but support someone else for Sheriff and you’re done.