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Montgomery, Md., pension deal eases sacrifice for unions

Montgomery council member Phil Andrews, center, is flanked by George L. Leventhal and Valerie Ervin.
Montgomery council member Phil Andrews, center, is flanked by George L. Leventhal and Valerie Ervin. (Katherine Frey/The Washington Post)
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In that time, total wage and salary costs for the county government and public schools has grown, after adjusting for inflation, by about a third, to more than $2 billion.

Greater still was the rate of growth in health and retirement benefits for government and school employees, which rose to $686 million in that same period, a 75 percent boost after adjusting for inflation.

The total county budget for the current fiscal year is $4.47 billion.

Even in wealthy communities such as Montgomery, decisions on benefits raise an important question: Can the spending be sustained?

"Sustainability is a funny word," said Susan Urahn, managing director of the Pew Center on the States, which has tallied trillions of dollars' worth of retirement promises made by state governments across the country. "They can certainly sustain it. But it means they can't pay for something else."

Phantom benefits

In the middle of a recession, Montgomery's labor contracts were reopened.

Schoolteachers agreed to go without their cost-of-living increase for this fiscal year. County police and general government unions made similar agreements, amounting to more than half of their negotiated raise.

Still, any raise at all was better than most were getting. Many other governments in the Washington area, including Fairfax County, had frozen salaries, and workers in Prince George's County saw smaller paychecks because of furloughs.

But the Montgomery firefighters union rejected a 3.5 percent raise for most of its members and held out for the contract's 7.5 percent.

County Executive Isiah Leggett (D) took a hard line. Deals with other unions could have come undone, and potential savings of more than $100 million could be lost, he said. So he crafted a budget without the higher raises, and he sent it to the County Council, which makes final spending decisions. The firefighters challenged the move with a county labor arbitrator, but they lost.

Soon the firefighters agreed to forgo part of their raise. The county's agreement to pretend, for retirement purposes, that the firefighters got the full amount was part of what they got in return. (The firefighters also negotiated unlimited free passes to county gyms and swimming pools.)

"On behalf of the 1,200 firefighters who didn't get their pay raise that was negotiated, I don't find it excessive at all," said John Sparks, head of their union. The agreement said the parties would "postpone" the raise. Police and general government employees got the same pension deal. School unions did not.

Such arrangements are unusual. In Fairfax, there was no "phantom" COLA. "Because your salary didn't go up, your retirement contribution stays flat as well," said Susan Woodruff, Fairfax's human resources director. "It tracks what you actually earned, not what you should have earned."

Anne Arundel County officials gave a one-year "phantom" bump to pensions, not one that lasts for decades as in Montgomery. A financial adviser to Montgomery pushed for such an approach, which would have been dramatically cheaper, but the County Council rejected it. "This is not Montgomery County," said Anne Arundel budget officer John Hammond. "The electorate in Anne Arundel is very fiscally conservative."

Montgomery County Council member George L. Leventhal (D-At Large) said that firefighters made "significant sacrifices" and that the council balked at some benefits negotiated by employee unions after contracts were reopened. "I don't recollect that being a big issue," he said of the "ghost COLAs."

Leggett said he has taken a tougher approach than his predecessors. Refusing to fund an existing labor agreement was unheard of, he said. "No county executive has ever done what I've done," he said.

The retirement increases were a fair trade-off, he said: "It's not as though we're adding something in. Any way you look at it, we're taking something away."

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