It was at the end of a particularly dull press conference about a month ago when reporters were having trouble posing the easiest of questions, that Acting Gov. Blair Lee III jokingly waggled his forefinger at the journalists and warned that they were ignoring one of the year's key issues: state pensions.
"I know it bores you," Lee said, triumphantly catching one lethargic reporter in a yawn. But though his tone was light, Lee was quite serious. He is a man who cares about financial problems and has spent a long time mastering their complexities.
It is clear that Lee and several legislative leaders and state fiscal experts view Maryland's pension system as a disaster, a time bomb that will explode in a decade or two, leaving the financial affairs of the state in hopeless tatters.
The solution Lee advocates comes in the form of an exceedingly complex bill - a bill that runs 80 pages or more - which would ultimately cut back state pension payments. The bill is the product of a study commission on pensions headed by State Sen. James Clark Jr. (D-Howard).
However, the solution finds little favor with the three unions, which speak for the 60,000 state employees and 35,000 teachers enrolled in the present pension system. But since they have not offered any alternatives, the debate in the general assembly is likely to divide legislators into just two camps, on either side of the Clark commission proposals.
At present, both the state and its employees contribute toward the pension fund, and on retirement, the employee is paid according to the following formula: His salary for his three highest-paid years is averaged and then multiplied by the number of years he worked for the state. That figure then is multiplied by a factor of 1.82 per cent.
Take, for example, a 65-year-old employee, retiring in 1977, whose average salary for his three highest-paid years was $17,500 and who worked for the state 20 years. Under the formula, his annual state pension would be $6,370, in addition to normal social security payments.
The Clerk commission's bill would reduce this pension substantially, to about $3,836 - a point persistently hammered at by the commission's detractors. However, proponents of the bill say the new system would ensure the system's future financial stability, something that is now very tissue.
Furthermore, they say, it would eliminate the need for employees to contribute to the fund. And no present state employee would be forced to switch from the present system. The new system would be required only for employees hired after his inception. It would be open to present employees whose earlier pension contributions would be refunded in a lump sum, if they choose to join the new plan.
The formula for the new system is exceedingly complex and tied to the fluctuating wage base of the social security system. The wage base,under the social security system is the maximum and amount of salary on which Israel security taxes can be levied.
Reduced to its most basic elements, the new system would pay an employee .7 per cent of the maximum wage base for his three highest-paid years, multiplied by his years on the job.
However, if the average salary exceeded the average wage base taxed in his working years, his pension would be increased, under another formula: The difference between his highest average salary and the average wage base would be multiplied by 14 per cent. That figure would be multiplied by his years on the job.
Yes, it is horrendously complex. And it has two major political drawbacks. One, the pensions offered under the new system would almost certainly be lower than those offered workers in the present plan; two, the Clark proposal calls for advance funding of the entire system, which will cost the state an additional $36 million in the next fiscal year and the years following it, according to William Ratchford II of the fiscal services department. Currently, the state spends $184 million on pensions.
But, Ratchford said, "We'll be spending millions now in order to save billions in the year 2000." And he adds. "If we don't do it, somebody will make us do it."
Clark agrees that getting his fellow legislators to buy his bill "is going to be tough. But it's absolutely necessary to proceed with it. We spent two years finding out where we're going, and where we're going isn't good. We have to do something to change this."
Herbert Whitehouse, however, doesn't see any point in replacing an old bad system with what he considers a new bad system. Whitehead, the benefits expert of the American Federation of State, County and Municipal Employees, complains that the new formula takes more away from lower-paid workers than higher-paid workers.
He also says that the new system would not meet his main criterion for a fair retirement system: that a government worker with 30 years' of service should have the same spending power after retirement that he had before.
Whitehouse's union, AFSCME, is taking a somewhat more moderate line in opposing the proposal than its two fellow employees' unions, the Maryland State Teachers' Association and the Maryland Classified Employees Association.
The unions' chief ally in the legislature is Senate Majority Leader Roy N. Staten (D-Baltimore County), who already has made known his opposition to the Clark proposals.
Even so, said Clark. "I think the proposal will pass. The figures are going to be there looking the legislators in the eye. There's no use putting this off."