NO ISSUE in the past two decades has produced more bitterness and anger in the State House than pension reforms for state employees and teachers. Twice the governor and legislature reined-in the cost of pension programs that threatened to place an onerous burden on taxpayers. And twice there was a high political price to pay.
Now the issue has returned, but with a new twist: Benefit reductions in 1979 and 1984 have not been moderated over the years, giving Maryland the dubious honor of having the lowest pensions of any state government. This time, teacher and employee unions are lobbying hard for reforms, and fiscal conservatives are defending the status quo.
Both sides have valid points. Clearly, current pensions must be raised. But the state cannot abandon its commitment to gradually eliminate Maryland's unfunded pension liability.
One step that makes sense is to cash in on the state's recent stock-market gains that far exceed projections. This would free up $610 million to improve retirement payments, while keeping another $610 million as a hedge against recession.
A second sensible move is to require members of the pension plan to contribute 3 percent of salary to the fund. This would produce $850 million over 40 years that could be used to hike pensions payouts.
A third step that seems in order is having the state match a portion of worker contributions to a 401(k) retirement account. A state match would encourage employees to save for retirement through these supplemental plans.
Fourth, the pension board should approve a slightly higher projected growth rate for the $23 billion system. This modest bookkeeping change would help pay for higher benefits.
The most controversial suggestion asks the state's taxpayers to fork over $1.7 billion over 40 years -- an annual contribution of $42 million. That's a huge sum, the equivalent of the state's entire aid package to local governments for health programs. Only a more modest proposal has a chance of winning legislative support.
State officials urging caution worry that a rash act of generosity could cost Maryland its coveted triple-A bond rating. It also could crush efforts to wipe out Maryland's unfunded pension liability and could place the state, once again, in perilous fiscal straits.
Finding a middle ground -- better pensions but at a sound, affordable price -- will be the job of Gov. Parris N. Glendening and legislative leaders in 1998. The last thing they want is a political firestorm during an election year.
Pub Date: 6/26/97