Finally, a plan for pensions

Our view: State can no longer afford to bear the full burden of teacher retirement

March 23, 2010

Sometimes a little pressure can be a good thing, as when a lump of coal turns into a diamond. In Annapolis, lawmakers have endured several years of budgetary squeeze as the economic recession has forced difficult choices upon them, but last week a small gem was spotted.

The shiny glimmer was the Senate Budget and Taxation Committee doing what heretofore seemed politically unthinkable: It voted to gradually end the practice of having state taxpayers bear the full government expense of teacher pensions (aside from the teachers' matching contributions, of course).

That practice is one of the more foolish ways Maryland underwrites the cost of K-12 public school education. Not because teachers don't deserve retirement benefits - they certainly do - but because pensions ought to be funded by whomever sets their salaries. That responsibility lies with Baltimore and the counties.

Because pension benefits are tied to salaries (the more one earns, the more one receives in benefits), it's budgetary madness for local government to set salaries in the short term, free from the long-term benefits burden that inevitably comes with it.

And what a burden that has become (one that, without General Assembly action, would grow much worse). Maryland contributes about $600 million toward teacher pensions each year. The budget approved by the Budget and Taxation Committee on Friday and scheduled to be considered by the full Senate this week would trim about $60 million next year and more in future years.

By fiscal 2014, local governments would be responsible for about half of retirement costs for teachers and public library and community college employees. Within three years, the savings to the state budget would total about $328 million annually.

The most troubling aspect of the teacher pension formula has been that it disproportionately benefits the wealthiest counties. While state spending on education ought to level the economic playing field, the pension payout does the opposite.

Yet you can bet that the budget and tax committee would never have proposed such a move under normal circumstances. Next year's looming $1.8 billion budget shortfall no doubt helped some committee members summon the courage to take on the politically powerful teachers unions in an election year.

On this issue, teachers have shown difficulty looking beyond their self-interest. No one is asking them to take a benefits cut, but they recognize a possible impact on salaries. Once local governments accept some responsibility for pensions, that cost will be calculated in future teacher contract negotiations.

But that's not unreasonable. It requires only that teachers be treated honestly and fairly - and that government budget for public education rationally.

Now the pressure is on the full Senate to pass the committee's changes to Gov. Martin O'Malley's $13 billion general fund budget intact, and for the pension decision to withstand anticipated opposition in the House. But as committee members wisely realized, if state aid to education must be reduced (as economic circumstances so clearly warrant), then gradually shifting pension costs is by far the most sensible way to do it.

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