With this year’s budget debate in Maryland’s House of Delegates set to begin Wednesday afternoon, a competing pension plan has emerged that the state’s largest teacher’s union has been discussing with legislative leaders and the administration of Gov. Martin O’Malley.
The proposal by the Maryland State Education Association sent to House lawmakers Tuesday night warned that the 71,000-member MSEA would not support either the governor’s proposed plan from January, or a reworked version from a House budget committee last week that significantly watered down cuts to retiree health-care benefits.
MSEA’s plan says it will achieve a federally recommended funding level of 80 percent for outstanding pension costs “two or three years after” the plans put forward by both the governor and the House.
Those plans would reach the threshold in 2023. Maryland’s pension plan has fallen from nearly 90 percent funded to a projected 59 percent funded in 2012, thanks largely to poor returns on investments during the recession.
The union’s plan would also keep several existing rules in place that would benefit soon-to-be retirees. It would continue to calculate teachers’ pension benefits based on their last three years on the job, rather than the governor’s proposed last five years. Existing vesting rules would also remain the same. The governor’s plan would have required new hires to work 10 years instead of 5 to be eligible for retirement benefits.
MSEA would concede to requiring new hires to work 30 years before being eligible for normal retirement. Employees would contribute 7 percent instead of the current 5 percent to their pensions, but the higher rate would be phased in over two years.
Del. Melony Griffith (D-Prince George’s), who negotiated House version said, “It’s no surprise that people would like to have a more beneficial package, but quite honestly we can’t afford it.”
“We could promise not to make changes, but then we can’t promise we’ll be able to pay when they come to collect their benefits,” she said.
David E. Helfman, executive director of MSEA, said the alternative accomplishes the same objective.
“We’ve offered to pay more and accept a slightly lower benefit, and that combination provides an alternative that saves every bit as much,” Helfman said.
The union plan, however, would “treat all of our members equally. It doesn’t create a lower-benefit, higher-cost system for new hires,” he said.
O'Malley spokesman Shaun Adamec said the governor is reviewing the proposal.
The plan would have roughly the same impact in fiscal 2012, Adamec said, but "it takes a little longer in the out years and there is a long-term sustainability problem."