Md. Senate passes budget that would shift cost of teacher pensions to counties

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By Aaron C. Davis
Washington Post staff writer
Thursday, March 25, 2010

Maryland's Senate passed a $31.9 billion budget Wednesday that would shrink overall state spending and fundamentally shift responsibility for teacher retirement costs from the state to counties.

The retirement-cost plan faces stiff resistance and is not expected to survive in the House of Delegates. But fiscal watchdogs and longtime lawmakers said the fact that the Senate passed the controversial change probably means it's now a matter of when, not if, Maryland counties will soon be responsible for hundreds of millions of dollars annually in teacher pension costs.

Maryland pays nearly the entire cost of every teacher retirement plan in the state, although counties negotiate the teacher salaries that ultimately dictate the amount the state will have to pay in retirement costs. The counties make Social Security payments.

In recent years, as Maryland has significantly increased funding for education and many counties have gained national attention for the quality of their classrooms, teacher pay has increased, and in turn, the state's long-term teacher pension costs have soared.

The plan approved by the Senate would in 2012 force local boards of education, community colleges and libraries to begin setting aside 1 percent of teachers' and librarians' payroll costs for retirement. That percentage would increase until 2014, when counties would pay about half of the expected $1 billion in annual costs.

Senate President Thomas V. Mike Miller Jr. (D-Calvert) praised the move, citing a national study that recently ranked Maryland among the five worst states in the country for underfunding teacher pensions. Miller also said the fix would help halve the state's projected deficit to about $1.2 billion in future years.

"It would be a dereliction of duty if we did not begin to move forward on meaningful pension reform this year," Miller said.

House Speaker Michael E. Busch (D-Anne Arundel) said that it would be difficult for his chamber to follow suit this year. That's because Montgomery County lawmakers in the House oppose it, said Brian J. Feldman (D), the county's House delegation chairman. At a recent budget hearing, House Minority Leader Anthony J. O'Donnell (R-Calvert) also said his caucus opposes the shift because it would probably lead to local tax increases.

The teachers' unions have also opposed any shift in costs to counties, fearing it would limit counties' abilities to continue to pay competitive salary and benefits.

Aside from the pension provision, most other portions of the $13.2 billion in general fund spending plan that the Senate passed closely follow that proposed by Gov. Martin O'Malley (D) for next year. Exceptions include $120 million in cuts, including halving proposed funding for a Chesapeake Bay cleanup fund and grants for stem cell research. The Senate left intact O'Malley's proposal to spend $20 million for employer tax credits designed to spur job growth.

Another provision in the Senate would restore about $18 million in funding for Prince George's County through so-called disparity grants. The grants are designed to give additional funding to counties with lower per-capital income. But in recent years calculations were done before many wealthier residents filed their tax returns -- a practice Prince George's officials said shortchanged the county by making it look richer than it really is, relative to Montgomery.

Staff writer Jonathan Mummolo contributed to this story.


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