JUST DAYS after Maryland Gov. Larry Hogan (R) took office, he issued a call for fiscal and budgetary integrity. Gimmickry in Maryland’s state finances was a thing of the past, he said. “We’re not going to rob Peter to pay Paul.”
Democrats resented the Republican governor’s tone, but his prescription was fair enough. His predecessor, Martin O’Malley (D), had indeed engaged in some creative bookkeeping to make ends meet during and after the recession (as had plenty of other governors).
No one expected Mr. Hogan not to give a little when the hard bargaining in Annapolis commenced. But now that Democrats are busy reversing many of his recommended cuts, he needs to take a hard look at their methods. In particular, Mr. Hogan should keep a stiff spine in opposing any raid on the state pension fund, which has been short-changed, mismanaged and neglected for years, with predictable results.
The fund, on which hundreds of thousands of past and present state workers rely for a secure retirement, is malnourished: At the moment, its balance sheet is scarcely two-thirds the amount needed to meet the state’s long-term obligations.
After ignoring the problem determinedly, lawmakers in Annapolis got a fright when the stock market’s swoon during the recession further depleted the fund. They took action in 2011 to pump an additional $300 million annually into shoring it up, with the goal of restoring it to good health by 2023 (though full funding would take years more).
Now Wall Street’s bull market has induced amnesia in Annapolis, fattening the fund and convincing lawmakers they can again relax. Last year, they slashed additional annual contributions to the fund in half, to $150 million, and this year they are weighing halving it again, to $75 million . The result would simply shift payments into the future, saddling taxpayers a decade or two from now with a bill the legislature’s own chief analyst called “eye-popping.”
The lawmakers’ intentions aren’t evil — only craven. They want to divert cash from the fund to reverse Mr. Hogan’s (relatively modest) proposed cuts, especially to public schools and state employee pay. Or, as one senior lawmaker told us, it’s better to take a “holistic” approach to the state budget.
It was precisely such “holistic” — rather, “hole-istic” — thinking that produced the pension fund crisis in the first place. It’s politically easier to push the problem into the out years, when many lawmakers will have retired. But it’s impossible to regard such a course of action as wise.
The day of reckoning for Maryland’s pension fund will come. Sooner or later, legislators will have to accept budget cuts or impose new taxes to meet the state’s commitments and preserve its credit rating. They have simply deferred the pain.
Mr. Hogan seems to have succeeded in persuading lawmakers to accept other cuts to close the state’s long-term structural deficit. But if he stands aside while legislators raid the pension fund again, his victory will be Pyrrhic.