Pension plan on bumpy road Confusion reigns as council weighs Gary reform measure

'An awful lot of doubts'

Administration may be losing support amid frustration

July 21, 1996|By Scott Wilson | Scott Wilson,SUN STAFF

In recent weeks, the Gary administration, labor unions and the County Council have staged a political melodrama over a comprehensive plan that would shrink Anne Arundel's $750 million retirement system.

What was supposed to be a bloodless battle for pension reform has been all emotion with virtually no solid numbers to anchor the debate. Several council members and labor leaders are blaming the Gary administration for the confusion of recent council hearings.

Critics say the administration has misinformed the council, the county's 3,500 employees and its 1,100 retired workers to win legislation that would cut retirement benefits. Even some of the administration's traditional defenders agree that bluster and incomplete analysis from top officials have clouded the issue.

The result is that County Executive John G. Gary may be losing the support of the Republican-majority council as it considers a bill with consequences for county employees past, present and future.

"I think it's absolutely getting under [council members'] skin," said Dennis P. Howell, president of the Fraternal Order of Police Lodge 70. "It doesn't take a whole lot of smarts to figure out that the administration has no intention of trying to provide the truth."

At least part of the reason for the confusion is that the 41-page pension bill falls far outside the expertise of those who are debating it, from attorneys to council members to union leaders. It was written by a Baltimore law firm and is being interpreted by a Towson law firm hired by the council.

As a result, personal attacks have substituted for fiscal analysis. Political lectures usually reserved for amateur pundits have filled in for actuarial reports.

At a recent hearing, county administrative officer Robert J. Dvorak blamed New Deal and Great Society programs for employee opposition to pension reform.

The council will decide this week whether to hire its own actuary.

"I have an awful lot of doubts," said James E. DeGrange, a Glen Burnie Democrat. "I'm concerned that some of my colleagues haven't asked questions. And I don't think they understand it."

Council members have asked Gary's aides to prove that the administration's claim that the retirement system is headed for a financial "train wreck" within 10 years if it is not reformed.

This week, administration officials will make a presentation to the council with projections and charts. It will be part pension lesson, part political argument.

"There's been a lot of misinformation out there, and maybe we haven't done the best job of making our case," Dvorak said. "Hey, we're not perfect. That's why we have proposed changes to the bill."

The county's pension fund comprises three pools of money -- fixed employee contributions, investment earnings and county contributions. The last two are linked. If investment earnings increase, Anne Arundel gives less; the reverse is also true.

According to administration figures, the pension system has a market value of $523 million, an actuarial value of $476 million, and roughly $750 million in financial responsibilities to current and future retired employees.

The extent of the system's "unfunded liabilities," or debt, ranges from $75 million to $129 million, depending on what mortality rates are used. The varying fiscal terms and fluctuating figures have made for incomprehensible debate.

"It puts into place so many changes that it's tough to understand it all," Councilman William C. Mulford II, an Annapolis Republican, said of the reform plan.

During spring budget hearings, the administration said pension reform would save $2.5 million this year by shrinking projected costs of $19.3 million to $16.8 million.

Those savings were built into the $754 million budget passed before pension legislation was introduced May 31 and will have to be achieved by cutting other programs if the council does not approve the changes.

The budget also included savings for future years. Council members will have to trim $6 million a year from future budgets if they defeat the administration bill, which would eliminate guaranteed cost-of-living raises for retired workers and create a less-generous pension system for new employees.

"It's a terrible position to be in," said LeRoy A. Wilkison, president of International Fire Fighters Association Local 1563. "If they'd known some of the impacts beforehand, maybe they wouldn't be in it."

Administration officials also have testified that county unions agreed during contract talks last spring to elimination of the guarantee of cost-of-living adjustments (COLA). That plan would allow COLA increases only if the pension fund's investment earnings cover the cost.

"We have never, never, never accepted these COLA changes in any form," Howell, the FOP president, told the council last week. "Don't believe for a second we have agreed to this."

County officials are sending labor contracts to the council so that members can determine what was agreed during collective bargaining.

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