It sure has been nice of state government to keep giving Maryland counties a $1 billion free ride on teacher pensions. No wonder local county leaders are kicking up a fuss because the governor wants them to share the burden.
Going 50-50 with the state on pension and Social Security expenses for retired teachers is not acceptable, says Montgomery County Executive Isiah Leggett.
Better to force the state to continue its unique generosity than for counties to take responsibility for their own teachers’ retirement payments.
Leggett isn’t alone in complaining. Prince George’s County Executive Rushern Baker feels the same way. So does Anne Arundel County Executive John Leopold, who calls the governor’s proposal “a heavy burden” on his county.
Methinks the county executives protest too much.
According to the legislature’s Department of Legislative Services, Gov. Martin O’Malley’s cost-sharing plan would force counties and Baltimore city to give up $268.9 million in pension payments they now receive from the state.
If that were the end of the story, county governments would be rightly outraged. Montgomery would lose $53.8 million, Prince George’s, $37.5 million; Frederick County, $11.1 million; Anne Arundel, $23 million, and Baltimore city, $25.3 million.
But O’Malley is offering sweeteners that flip this negative outlook.
Income tax changes on exemptions and deductions for higher wage earners, plus smaller revenue enhancements, will give counties $224.4 million in new money. That would cut the net loss to all 24 subdivisions from O’Malley’s teacher pension/Social Security cost-shifting to $44.5 million.
Then the counties gain from increases in Maryland’s education aid formula — a total increase of $186 million, including an additional $46 million for Prince George’s, $37 million for Montgomery, $33 million for Anne Arundel, $6.7 million for Frederick and $15.2 million for Baltimore city.
There’s also a disparity grant supplement that tacks on $19.6 million to certain counties’ education aid, including $7.6 million for Prince George’s and $7 million for Baltimore city.
When you tally it up, the counties aren’t on the short end of the education stick: They emerge as net winners by $162 million.
Those aren’t the governor’s inflated figures but the legislature’s impartial numbers.
At the end of the day, Montgomery, despite Leggett’s protests, would be $48.7 million ahead; Prince George’s, even with Baker’s concerns, would pick up an additional $42.6 million; Anne Arundel, despite Leopold’s hand-wringing, would net an extra $30.8 million, and Baltimore city would finish $11.8 million in the black.
The problem is that the counties have been spoiled by the state’s willingness to foot the entire bill on teacher pensions.
Over the years, the counties didn’t worry about soaring retirement costs in their budgets for teachers because it was the state’s problem.
That made it easy for counties to let their school boards negotiate generous teacher pay hikes without figuring in how much more that would add to the counties’ pension costs.
No wonder over the past 10 years the median income for teachers rose three times faster than the median income for all state households.
It was a great arrangement for teachers and the counties — but not the state, which faced unsupportable, and rising, long-term teacher pension expenses in the tens of billions of dollars.
Last year, O’Malley took on the teacher unions and was able to gradually lessen the state’s extended retirement obligations. Now he seeks to reform the inequitable split between the counties and the state on pension-Social Security payments.
The alternative would be to continue the one-sided arrangement and force the legislature to cut a whopping $268.9 million from the governor’s budget or vote to raise more taxes.
The irony is that the state doesn’t have any say in hiring local teachers. It can’t control the number of new teachers added. It plays no role in setting teacher salaries. Yet, all these activities by local governments raise the state’s teacher retirement expenses.
Counties have full control over such matters — but they don’t want to assume any of the obligations for higher pension payments they’re causing.
Legislators may yield to pressure from the counties, but it would be nearly impossible to jettison the governor’s cost-sharing plan and justify deep Medicaid or environmental cuts just so the counties can avoid their teacher retirement obligations.
More likely are tweaks and other revenue-raising schemes that send more tax money to localities. One possibility: legalizing table games at Maryland slots sites — subject to voter approval in November — with all counties getting a small slice of the proceeds. Another possibility: approving an income surtax on millionaires.
Regardless, state government is no longer strong enough financially to play Santa Claus to the counties on teacher pensions.
Nor is the state economy going to suddenly bounce back and produce a gusher of new revenue. Sluggish growth, at best, is predicted.
Adding to the state’s problem is what Warren Deschenaux, the legislature’s fiscal guru, calls “the big train that is coming” — federal cuts costing Maryland hundreds of million of dollars in aid and major federal job losses.
Getting Maryland’s teacher pension payments under control had better be done before that train arrives.
Barry Rascovar is a State House columnist, communications consultant and radio commentator on WYPR-FM (88.1). He can be reached at brascovar@hotmail.com.