Pension lessons

December 15, 2005

Maryland's public school teachers are asking Gov. Robert L. Ehrlich Jr. and the General Assembly for a major increase in pension benefits, and it's not hard to understand why: They earn some of the lowest pensions in the country. And lawmakers, particularly Democrats, are itching for their support in the coming election. But the plan the teachers are offering is extraordinarily expensive. That alone should give legislators pause, particularly at a time when private firms are scrapping fixed-benefit programs, not expanding them.

It's a complex matter. Under the current system, a teacher hired today who retires in 30 years will earn a pension equivalent to 42 percent of salary. In Pennsylvania, a teacher might earn 75 percent of pay for an equivalent length of service. But Pennsylvania teachers contribute far more toward pensions - up to 7.5 percent of salary, compared with the 2 percent Maryland teachers pay.

Maryland needs to attract and retain the best teachers for its public schools. What role do retirement benefits play in attracting the best teachers? Probably not much. In keeping them? That's a more compelling argument. Maryland needs to stay competitive with surrounding states - and to be fair to these valued educators.

The teachers' proposal would cost the state close to $500 million per year. That's a big number. Pouring millions into education (much of it going to teacher salaries, incidentally) but failing to finance this new expense is precisely how the Democrats got in trouble with voters four years ago. As a candidate for governor, Mr. Ehrlich criticized the Thornton education program as fiscally irresponsible.

There is room for compromise, but Democrats can't afford to pander. They should not, for instance, increase retirement benefits retroactively. And teachers should have to pay half of any benefit increase. For the long term, lawmakers should consider the option of putting money into a 403(b) retirement savings account in lieu of a bigger pension. Younger teachers might actually prefer that - and it reflects private-sector trends.

Clearly, state retirement benefits should be better. But spending a lot more money on pensions means less for other needs, including teacher pay and health care. And it benefits the wealthiest counties disproportionately, which is not how state aid should be doled out. Maryland's teachers have asked for help. Now, it's up to the governor and lawmakers to devise the right answer.

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