Correction to This Article
An earlier version of this editorial left the erroneous impression that counties negotiate retirement benefits with teachers. In fact, teachers' pensions are determined by their salaries, which are negotiated with county school systems.

Maryland awakes from its bender on teachers' pensions

Tuesday, April 6, 2010

BREAKING THE BANK in Maryland has been a bipartisan, multilateral pursuit for years, backed by both parties at the state and local levels alike. When state lawmakers enacted a big increase in teachers' pensions four years ago -- an increase that freighted Annapolis with huge obligations to cover benefits negotiated by local school systems -- the move was pushed by Democrats, signed by a Republican governor, cheered by localities and hailed by then-Lt. Gov. Michael Steele, now the national GOP party chairman.

So what if no one knew how the pensions would be paid. It was an election year, the teachers are a potent constituency, and the economy would keep on booming forever, right?

Like drunks waking up after a bender, some officials in Annapolis are now wondering how to repair the damage. The state Senate president, Thomas V. Mike Miller Jr. (D-Calvert), has threatened that Maryland will put localities on the hook for the state's entire commitment to cover pensions for teachers, library workers and community college staff -- a payment pegged at $900 million a year and rising fast. At current trends, Maryland's annual spending on these pensions will shortly outstrip its entire outlay for higher education.

Fearful of saddling Maryland localities with a crushing burden, state Sen. Richard S. Madaleno Jr., a Montgomery County Democrat, has proposed phasing in over five years what would amount to a 50-50 split of the pension cost between the state and localities. (Pensions for other local employees, including police and firefighters, are already handled locally.) His proposal, adopted by the Senate but rejected by the House of Delegates, will be the subject of intense negotiations in this final week of the General Assembly session in Annapolis.

It is being bitterly attacked by localities, especially Montgomery County, which, as the state's largest jurisdiction, benefits most from the status quo. If Madaleno's bill is enacted, Montgomery, whose budget would be nearly $5 billion by 2015, would take a $70 million annual hit to pay its share of the bill. County and school officials say they'd be forced either to raise taxes or fire hundreds of teachers.

This is unfair, of course; after all, what the state is contemplating is a sudden change in the rules. On the other hand, the status quo is untenable. As the Pew Center on the States recently reported, Maryland's unfunded pension obligations are perilously high. More to the point, an arrangement whereby county schools negotiate teachers' salaries (which in turn determine pension levels) and then hand the pension bill to the state constitutes an incentive for irresponsibility. If the counties have no skin in the game, why should they be stingy with taxpayers' money? Unsurprisingly, few states have a similar arrangement.

Gov. Martin O'Malley (D), facing a tough reelection fight, would rather not face the issue this year. But deferring it is just another way of kicking the state's looming fiscal problems down the road. Better to strike an equitable deal now than watch the problem swell and fester another year.

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