Free Ride for Rich Counties

BARRY RASCOVAR

November 01, 1992|By BARRY RASCOVAR

Suppose you had to pay the interest expenses for every home mortgage in your neighborhood -- all 24 of them. Whenever someone built a costly addition through a home-equity line, you got stuck with the extra interest charges. Pretty soon, all your neighbors would be enlarging their houses all the time at your expense.

Eventually, it would be a short walk to the poor house for you -- and a heck of a good deal for them.

That's the situation faced by the state of Maryland today. It pays all the Social Security and pension expenses for the state's 24 subdivisions' teachers, librarians and community college employees. The annual bill comes to half-a-billion dollars -- and it is rising.

When counties want to hike the salaries of their teachers and librarians, they never think for a moment about the fiscal impact this will have on the state. They get a free ride on this one.

The situation becomes more alarming for the state as teacher pay rises, as more teachers are added to the rolls and as teachers settle in for long careers. Pension costs and Social Security payments balloon. The state is left with this unrestrained fiscal obligation.

Affluent counties have, not surprisingly, taken the biggest advantage of this inequity. They have the fiscal resources to offer high salaries, which naturally attract the most-experienced teachers who are eager to remain there for decades. This adds to the state's pension and Social Security bill.

None of this is fair -- or rational. In a rational world, the government that sets the salary would also be responsible for paying the employee benefits, too. There is no incentive for a county to keep Social Security and pension costs under control. If you're given a free meal at a restaurant, would you order filet mignon or the blue-plate special?

So it's not surprising that as state officials attempt to terminate part of this unfair payment scheme, affluent counties object loudly. Nor is it surprising that teachers unions turn apoplectic. They have much to lose if this change takes place.

What's propelling this change in Annapolis is the state's dire fiscal predicament. Faced with yet another big deficit -- $500 million this time -- the governor and legislature are looking for ways to cut expenses. Turning teacher $147 million in Social Security costs over to the counties and city is viewed as the local governments' share of this round of budget-cutting.

Most alarmed by this turn of events is Montgomery County, the state's richest subdivision. Its schools are clearly the best in Maryland, and among the best in the nation. One reason is the high salary paid to teachers there. The state's Social Security contribution alone comes to $27 million a year. That's one heck of a nice subsidy.

The screams of anguish coming from Montgomery legislators began immediately. Education is a sacred cow in Montgomery. This take-away from the state is viewed as unconscionable. Yet what Montgomery's leaders propose as an alternative is equally unconscionable: cut local aid from other programs so Montgomery loses far less money while other counties lose far more.

Less alarmed by this turn of events are the state's poorer subdivisions. They don't have the money to match the kinds of salaries the rich counties offer teachers. They don't have the tax base to boost teacher pay by 8 or 10 percent a year, even in good times. So their Social Security liability is far less troubling.

That's one of the reasons state leaders are now focusing on eliminating these Social Security payments as a way to save money. It's a regressive aid program that rewards the rich counties far more than the poor subdivisions. As the rich get richer and the poor get poorer, the inequity widens.

Budget experts have talked for years about doing away with this state education subsidy because of its basic unfairness. A year ago, legislators almost managed to place a cap on future Social Security payments. That also had been suggested by the ill-fated Linowes commission on tax reform. But nothing ever came of it because of the political heat from Montgomery County.

This time, though, Montgomery may have isolated itself. A growing number of local leaders have come to the realization that turning Social Security payments back to the city and counties makes sense. It will help impose more fiscal discipline on local school boards and councils. Besides, any other plan to cut local aid by an equal amount would prove more painful for most of them.

The most recent round of budget cuts is forcing state leaders to try to rationalize state spending. It certainly doesn't seem rational for the state to keep picking up these Social Security costs when the state has no way of controlling these future expenses. That's the kind of common-sense approach to budgeting that should have hit Annapolis long ago.

Barry Rascovar is editorial-page director of The Sun. His column

on Maryland politics appears here each Sunday.

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