Rethinking public pensions

October 22, 2006

In Baltimore County, the rewards of public service sometimes go to those who wait - and wait and wait. Four veteran County Council members, if re-elected in November, will earn themselves a respectable annual pension benefit - more than $40,000 each upon retirement. That's not necessarily the stuff of game-show briefcases, but it's not bad for what is billed as a part-time job. And it has caused some people to wonder if offering elected officials quite so lucrative a pension is appropriate.

The critics have a point - but not because Baltimore County pensions are genuinely out of whack with other jurisdictions. They aren't. They're somewhat higher because council members contribute much more of their pay toward the benefit. County pensions may accrue at twice the rate of Baltimore City Council pensions, but County Council members contribute more than 2 1/2 times as much of their salaries.

And the suggestion by some that a pension keeps incumbents in office too long isn't much of an argument either. Yes, some incumbents ought to be retired as early as possible, but when they aren't, that's the fault of voters, not the pension plan. And of the many incentives to run for office - power, influence, prestige, etc. - a decent pension can't be that high on the list. Indeed, one could just as easily argue the reverse - that lower salary and benefits would lower the quality of candidates for public office.

No, the real problem with the pension benefit given Baltimore County Council members (or any other government employee) is that the world is moving away from pensions of all kinds. Private companies can no longer support the sharply rising costs of such benefits and have switched to defined contribution programs such as the 401(k). Public employee pensions cannot be far behind. And elected officials need to set a proper example by gradually phasing out their programs.

Across the country, there are growing signs that taxpayers have become weary (and perhaps even a bit envious) of public employee pensions. Several states have made changes in recent years - often out of financial necessity. An estimated 84 percent of state pension plans are considered underfunded. (Maryland's is among those funded at less than 100 percent.) When pension costs rise, taxpayers are frequently called upon to make up the difference.

This is not to suggest that Baltimore County, the state of Maryland or anyone else should abandon the pension promises made to their current employees (or even their elected officials). But the future is another story. And it shouldn't require the financial crisis of a bankrupt pension plan to trigger the needed reforms.

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