Panel votes for teacher pension bill Measure to increase benefits for state workers sent to House

'It's a big improvement'

Compromise sets contributions at 2% of salaries

March 28, 1998|By William F. Zorzi Jr. | William F. Zorzi Jr.,SUN STAFF

An election-year bill that would significantly increase pension benefits for state workers and public school teachers cleared its first hurdle last night when the House Appropriations Committee approved the measure.

The legislation, which is sought by the Maryland State Teachers Association and state employee labor unions, would increase the state's cost of funding the pensions by about $167 million a year, or about $3 billion over the next two decades.

Under the plan, employees and teachers would be required to contribute to their retirement plans. The version approved yesterday -- a compromise reached by the House committee and union officials -- calls for employees to contribute 2 percent of their annual salaries.

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

Del. Howard P. Rawlings, who chairs the Appropriations Committee, had resisted the plan and introduced a pension en- hancement of his own design, but last night he supported the legislation.

"I know when to fold," the Baltimore Democrat said.

The legislation, which is backed by Gov. Parris N. Glendening and House Speaker Casper R. Taylor Jr., is expected to be on the floor of the House today and to sail through the lower chamber, despite opposition from Republicans.

It faces a less certain future in the Senate, where some key lawmakers have expressed reservations about the proposal.

Maryland's pension benefits for teachers and state workers are among the lowest in the nation, though many states with higher benefits require employees to contribute.

Under the current Maryland system, an employee earning $25,000 and retiring after 30 years gets an annual pension of $6,000. Under the plan approved last night, the annual benefit would increase to $10,500.

For a 30-year employee with a $40,000 salary, the current benefit is $11,847. That would increase to $16,800 a year under the proposal.

The change in the pension program would become effective July 1, but an employee would have to contribute to it for five years before becoming eligible to collect the higher benefit.

The amended bill also would offer employees the option of taking part in a defined contribution program, in which the state would match an employee's contribution at 50 cents on the dollar up to $250 a year.

Proponents of improving the pension plan were pleased with the House proposal, though it was scaled back from what they had sought.

'Big improvement'

"It's not what we asked for, but it's a big improvement," said Mary Jo Neville, a lobbyist for the Maryland State Teachers Association.

"This is a reasonable compromise that will benefit the majority," said Peter Vaughn, executive director of the State Retirement Agency, who has been pushing for an enhancement of the pension plan that covers 267,000 workers and retirees.

State Treasurer Richard N. Dixon, a critic of the legislation, still had objections after a cursory review of the House compromise.

"My position is unchanged," Dixon said. "It's too costly."

Actuarial changes

The state's retirement board is committed to making actuarial changes that would compensate for the bulk of the state's cost of the pension enhancements.

One change would let the system take advantage of the dramatic increase in the assets of the retirement fund, mostly stocks and bonds. The second change would be a bookkeeping maneuver that would use a higher projection of annual growth of assets.

But, under the House plan, that would leave about $29 million a year unfunded in the state budget, according to a legislative analyst's report. That is the expected cost of the state's match in the defined contribution program.

Pub Date: 3/28/98

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