Last year, state lawmakers approved a proposal by Gov. Martin O’Malley that shifted part of teacher pension costs to the county level. Maryland is among the many states facing vast, unfunded liabilities in their employee retirement programs. A 2010 study by the Pew Center on the States estimated that states are at least $1.4 trillion short of meeting their commitments for retirement benefits. Montgomery’s required annual contribution to teacher pensions, $27.2 million in the current fiscal year, will grow to $44.3 million in fiscal 2016.
Legislators also tightened “maintenance of effort” rules, which mandate that schools receive, at a minimum, the same rate of per-pupil funding as in the previous year. The county spent a total of $576 million over the mandated minimum between 2001 and 2009, but continued extra support became more difficult with the recession.
The amended law makes it harder for counties to obtain a state waiver from the requirement and allows the direct funneling of state income tax to school systems if localities fail to meet the threshold. Montgomery officials said that any spending above the maintenance minimum is effectively locked into the following year’s base budget. Beginning in 2017, pension payments will also become a part of the education spending base.
It will raise the county’s minimum required payment to the school system by nearly $100 million from fiscal 2014 to 2017.
“It’s a good example of how the strictures of the pension law and the [maintenance of effort] law are affecting the county budget,” said the council’s staff director, Stephen Farber, who presented an analysis of County Executive Isiah Leggett’s proposed 2014 budget to the council Tuesday.
Farber said the solution is to compel state lawmakers to amend the 2012 maintenance of effort law “to eliminate its punitive, overreaching provisions.”
The measure was pushed heavily by state teachers unions and, with the exception of state Sen. Bryan Frosh (D), supported by the county’s legislative delegation.
The changes in state law have introduced additional tensions to the annual budget deliberations between the council and the school system. The school board asked the county for $10 million over its minimum spending limit in fiscal 2014. Leggett denied the request and recommended that school officials draw the $10 million from the system’s roughly $40 million in reserves. The council is now examining the request.
On Tuesday, some council members expressed deep concern about the spending trends.
“This is like a runaway train. This is very sobering,” said council member Valerie Ervin (D-Eastern County), chair of the education committee. “I think all of us ought to just get ready. These numbers are not sustainable. This budget is not going to be sustainable going forward.”
Council member Marc Elrich (D-At Large) said he was becoming increasingly concerned about the dwindling amount of money that is not already set aside to fill some law or mandate.
“I think we do have to have a discussion about [maintenance of effort],” Elrich said.