Glendening administration backs pension boost for state's workers Some officials fear Md. can't afford an increase, say bond rating may suffer

September 17, 1997|By William F. Zorzi Jr. and Thomas W. Waldron | William F. Zorzi Jr. and Thomas W. Waldron,SUN STAFF

The Glendening administration has endorsed a proposal to significantly boost pensions for tens of thousands of state workers, whose benefits are among the lowest in the nation for government employees.

Representatives of Gov. Parris N. Glendening joined a majority of the state retirement board, which voted 10-2 yesterday to support the pension improvements.

The matter now must be considered by the General Assembly when it meets in January.

The proposal endorsed yesterday would boost pension benefits significantly for most of the 134,000 employees in the system -- in some cases by as much as 75 percent.

Some key legislators, including House Speaker Casper R. Taylor Jr., already are on record in support of a major pension boost, and others will surely endorse a proposal appealing to thousands of state workers in an election year.

But the plan has generated opposition from some officials who say the state cannot afford such an enhancement and who worry that it would threaten Maryland's top-notch bond rating.

A recent comparison by the Maryland State Retirement Agency found that the pension plan covering most state workers, teachers and some other local employees provides the lowest retirement benefits of 47 state plans for teachers surveyed, and next to last among 46 plans for nonteaching employees.

Glendening would support pension improvements during the upcoming legislative session, said his budget secretary, Frederick W. Puddester, who sits on the board and voted for the plan yesterday.

"The administration would support a prudently financed enhancement to pensions if passed by the General Assembly," Puddester said.

Also voting for the proposal from the administration were David B. Mitchell, who heads the state police, and Nancy S. Grasmick, state schools superintendent.

The administration's support for the plan "completely surprised" state Treasurer Richard N. Dixon, who voted against the proposal.

"I think it was fiscally irresponsible," he said.

Dixon said he believes the plan threatens the state's AAA bond rating.

Karl K. Pence, president of the Maryland State Teachers Association, praised the board's vote. "They made the right decision for an equitable and enhanced pension benefit," he said.

To help pay for the benefits improvement, employees would contribute 3 percent of their salary to their retirement. They now contribute nothing.

In addition, the state would have to contribute as much as $1.7 billion over the next 40 years.

To cover the rest of the $3.1 billion cost, the state would take advantage of the dramatic increase in the assets of the retirement fund -- mostly stocks and bonds.

Finally, the proposal would use a bookkeeping maneuver to help defray the cost by projecting a 7.75 percent annual growth in the system's assets, instead of the currently projected 7.5 percent.

The retirement agency's independent actuary has advised that the pension improvement proposal is a prudent one.

Under the current system, a Maryland worker earning the average state salary of $28,525 who retires at age 62 after 30 years of service would collect an annual pension of $7,397, according to the retirement agency.

Under the plan endorsed yesterday, that same Maryland employee would receive a pension of more than $12,000.

The same employee would receive an annual pension of $17,970 in Ohio and $17,115 in Pennsylvania.

Pub Date: 9/17/97

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