Pension propriety

March 20, 2006

Some Maryland lawmakers drew a lot of heat recently for sticking up for principle. Members of the Senate decided that it's a bad - and apparently unprecedented - policy to grant a pay raise retroactively. Despite opposition from Gov. Robert L. Ehrlich Jr., they cut pay for correctional officers by $15.5 million. They gave the prison guards a little extra, as the governor had requested, but they declined to backdate the check to Jan. 1.

Correctional officers certainly deserve the money, but the legislators had a point: Employment is a contract. State employees agree to certain levels of pay and benefits in return for their services. It's all very well to give raises - or even cut benefits when that's required - but not retroactively. You can set new rules today, but your employer shouldn't be reaching into the past and monkeying with the terms of your previous compensation, budget surplus or not.

But legislators who couldn't sully the budget with bonuses for guards are now poised to give pension benefits retroactively to teachers and state employees. Senate and House proposals vary, but some would reach back as far as 1998 to give teachers credit for pension contributions that were never made - either by the state or by the teachers themselves. Such an effort is expected to cost taxpayers $100 million to $150 million this year.

Again, like the correctional officers, Maryland's teachers deserve greater compensation. Under the current system, teachers contribute 2 percent to 7 percent of pay (depending on their retirement plan); the resulting pension is calculated as 1.2 percent to 1.8 percent of salary for each year worked. That's among the least-generous plans in the country.

But legislators can't change the benefits of years past. It's not fair to teachers who have opted for higher benefits (and paid more into the system over the past two decades to pay for them) or to those who have retired. And, of course, the only reason this is even being contemplated is because teachers have tremendous political clout in the General Assembly, particularly with Democrats.

It's not unreasonable for Mr. Ehrlich and legislators to set aside $100 million or more to upgrade Maryland's teacher pension system. Their goal should be to keep the state competitive and retain quality teachers. But it's wrong to change the terms of past employment - even to a favored group in an election year.

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