An unusual pension benefit for police and firefighters could cost Baltimore $164.9 million next year, nearly double what the city is now paying and a figure that the city's finance director says taxpayers cannot afford.
After years of calls for pension reform, board members who oversee the nearly $2 billion system said their Tuesday vote that passes the whopping bill on to City Hall is a message that the fund is close to a breaking point and needs attention.
Edward J. Gallagher, the city's finance director, said the city "certainly cannot afford" to pay the full commitment due in July. "It seems that our concern has really come home to roost."
Pension costs for the roughly 5,800 retired police and firefighters are soaring at a time of deep budget problems. The city recently forced employees to take five unpaid furlough days, laid off workers and halted capital projects to chop $60 million from its current budget. Declines in projected tax revenues and cuts from the state prompted cuts. Another round of budget reductions is expected early next year.
The new retiree funding request is twice as large as the $81.9 million the city paid to the fire and police pension fund last year.
If the pension system is not altered before the bill comes due, needed cash could come from raising the city property tax rate 11 percent, or "significant reductions across all agencies, including public safety," Gallagher said. Mayor Sheila Dixon, who has long sought reductions in the city's tax rate of $2.27 per $100 in assessed value, has said both options are unacceptable.
Failing to pay a large portion of the bill could trigger a downgrade in Baltimore's AA bond rating, which would in turn increase the cost of borrowing money for capital projects.
The pension board's 5-2 vote narrows the window of time available for reform of a troubled system. Board members, however, have been saying for years that the fund needs tens of millions of dollars in order to continue paying current benefits.
"Of course I know we can't afford that" amount, said City Comptroller Joan M. Pratt, one of the five board members who supported sending the city the high bill. "There needs to be some changes in the benefits. The action that needs to be taken has been put off for a long time."
Peter Keith, the mayor's appointee to the board and a partner at a downtown law firm, also supported the measure, but said: "We have been paying out too much money. People have to collectively come together to solve the problem."
