MARYLAND GOV. Larry Hogan (R), who assumed office vowing to halt what he called budgetary gimmickry in Annapolis, took a step Thursday to give substance to that vow. After remaining silent for two weeks about a raid by lawmakers on annual contributions to the state’s pension fund for current and future retired public workers, Mr. Hogan threw down the gauntlet.
“Raiding the pension fund represents the kind of short-term thinking that has put Maryland in the precarious financial position we faced in January, and I simply cannot allow these actions to continue,” the governor said in a statement. “Protecting the integrity of our pension system is a common-sense measure that allows the state to keep its promises.”
With that, Mr. Hogan announced that he would insist on restoring the $75 million contribution that the Democratic-controlled legislature diverted from the pension fund. The Democrats want to use that money to reverse cuts proposed by the governor to schools and state worker salaries.
If that $75 million is restored for the fiscal year starting in July, it would bring to $150 million the state’s annual catch-up contribution to the fund, whose liabilities exceed its assets by some $20 billion. Keep in mind that under the original plan to return the pension fund to good health, enacted by the legislature in 2011, the supplemental annual contribution was supposed to be $300 million; lawmakers chopped that in half last year. They were set to halve it again this year until Mr. Hogan finally put his foot down.
Democrats in the General Assembly may try to push back, but their argument is weak. The pension fund’s current balance is scarcely two-thirds the amount needed to meet the state’s long-term obligations. In the long run, there is no choice but to replenish the fund, on which hundreds of thousands of state workers depend.
The effect of slashing the state’s annual contribution to the pension fund now would be to postpone payments, and pain, to a future generation of politicians — and, in the process, saddle taxpayers with an additional bill of some $2.5 billion, an amount the legislature’s own top analyst called “eye-popping.”
It is unconvincing to argue, as some lawmakers have, that it will be easier to swallow the price of deferred payment when weighed against state revenue a decade or two from now. What if another stock market swoon deals the pension fund a fresh blow?
There has been no end of speculation in Annapolis about how Mr. Hogan, who had never held elective office before he started in January, would set his priorities, and his governorship certainly remains a work in progress. However, he has repeatedly expressed a commitment to fiscal responsibility and to eliminating Maryland’s chronic structural deficit. By his action on restoring the pension money, he is demonstrating that his commitment is more than lip service.