Teachers eye an improved pension plan Governor, speaker back union's drive to expand benefits

At stake is $3 billion

Maryland's annuities called among worst in the United States

January 11, 1998|By C. Fraser Smith | C. Fraser Smith,SUN STAFF

With powerful politicians endorsing their election-year appeal, leaders of the Maryland State Teachers Association believe pension benefits for their members will be raised this year by the General Assembly.

Gov. Parris N. Glendening and House Speaker Casper R. Taylor Jr. have signed on to the teachers' approach to winning $3 billion in higher state contributions to their pension fund.

Even two of the teachers' oldest and most powerful opponents -- state Treasurer Richard N. Dixon and Republican state Sen. Robert R. Neall -- agree that improvements are warranted and overdue, though they disagree with the union on what to do.

The teachers are working diligently to arouse indignation and grass-roots fervor to impress legislators.

Mary Jo Neville, a union lobbyist and Democratic Party official, says MSTA has every expectation that Glendening will win re-election this year. But, knowing a less supportive Republican could be elected, the union is moving forcefully now while teachers know they'll have a supporter in the governor's office.

Glendening endorsed their effort recently, helping to line up support for the pension-increase legislation among members of the state's pension board -- despite reports that Glendening's backers were concerned the governor might appear to be serving the call of a special interest.

Those who support improved benefits are banking on what they hope will be widespread sympathy among voters and legislators for improvements in the state pension system -- rated by some as the worst in the nation.

"Of course, something should be done," Dixon says.

But he and Neall disagree with the teachers on what is the right approach. They do not support the teachers' approach, which, they say, would delay the current state pension system's steady march toward being 100 percent funded by 2020.

By then, Maryland will be able to meet future as well as current demands of those who are entitled to draw on it.

If benefits are increased as proposed by the teachers, the system would not achieve full funding until 2024.

The system's huge investment fund is performing well, but, even with employee contributions, the higher proposed payouts would mean the full funding target would be reached more slowly.

Other philosophical differences exist.

The teachers want a "defined benefit" provided in law by government, affording a pension equal to 45 percent of their final pay -- up from the current 29 percent. They have agreed to a 3 percent employee contribution and five years of payments before the improvements are added.

Most teachers and state employees do not currently contribute to their pensions.

The teachers' plan would also apply to most state employee pensions.

A study last year by the State Retirement Agency found that Maryland's pension allowances, which cover 200,000 workers and retirees, are the least generous of 47 state plans for teachers and next to last among 46 plans for nonteaching employees.

"We're not asking for the moon," says Alice Willingham, an English teacher and president of the MSTA chapter in St. Mary's County. "It's just a little step."

But Dixon, the state treasurer, says the teachers' proposal would increase the plan's unfunded liability temporarily and bring on additional investment risk. He says he hopes for vigorous debate that results in a more prudent approach.

He and Senator Neall prefer an approach combining state and employee contributions, something like the increasingly popular 401(k) and other "defined contribution" plans -- an approach that would give the state the flexibility each year to decide how much to contribute.

Both men are eager to see the results of a second, independent analysis of the system before taking a final position. That study is due Feb. 1.

The teachers' union has been working to create an uprising of election-year activism in its ranks. Its officials hope a tide of unhappiness will persuade Maryland legislators to support the improvements they seek.

Asked whether the union would attempt to defeat legislators who vote against them -- as it has successfully done in the past -- Willingham says, "We'd be terribly disappointed." She finds her 800 members deeply distressed about what they call a paltry retirement benefit -- and frustrated to learn they will have to campaign hard for improvements.

"It's such a no-brainer for them: We have a horrible pension. Let's improve it," she says.

But Dixon and Neall have been down this road before. Then a member of the House of Delegates representing Carroll County, Dixon risked the teachers' wrath by voting for benefit-trimming reforms in 1984. He was re-elected despite teacher opposition.

Neall says he saw the results of election-year improvements to Maryland's pension benefits in the 1970s -- and found himself in the midst of the grinding 1984 legislative battle to rescind some of the benefits. When he lost his race for Congress in 1986, he was passionately opposed by teachers.

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