Balto. County takes a step to defuse the pension bomb

April 11, 2010|By Jay Hancock

As Maryland, Baltimore and the nation head deeper into trouble over extravagant commitments made to government retirees, at least some politicians are making tough and responsible choices to shrink the payouts.

Changes made since 2007 under Baltimore County Executive James T. Smith Jr. will easily save taxpayers more than a half-billion dollars in pension and medical costs for local-government retirees over the next decade.

The latest dose of sanity came last week, when police and sheriff unions agreed to reduce cost-of-living adjustments and boost pension contributions in exchange for job security. Firefighters, nurses and general employees in the county are considering similar deals.

Give unions credit for recognizing that generous retirement benefits are unsustainable, bad for employees as well as taxpayers. Chiefs of the firefighter and police unions didn't call me back; maybe they're getting heat from members and keeping a low profile.

But Fred J. Homan, county administrative officer, puts the labor calculation plainly.

"The message we've conveyed to employees is that their benefits are paid for by taxpayers who very often don't have this kind of benefit structure," he said. If the gap between government and private-sector benefits keeps growing, he said, county workers "are going to lose connection to the people they serve, which is deadly for the long-term survival of those benefits."

Baltimore Mayor Stephanie C. Rawlings-Blake has started to address retirement costs, which she recently called a "time bomb." But too many politicians are mimicking Maryland Gov. Martin O'Malley, a Democrat who has done little about the $25 billion (and growing) in unfunded liabilities that taxpayers owe state government retirees.

Tick tick tick.

Taming retiree costs would be a great issue for Republican Robert L. Ehrlich Jr., who's running for governor, except for one thing: In 2006, when he was governor, he approved a pension upgrade for state employees that costs taxpayers an extra $100 million a year.

Public pensions have caused outrage and heartburn across the country. California has a half-trillion-dollar pension financing gap, thanks partly to 15,000 retirees getting more than $100,000 a year. Illinois, with a $90 billion shortfall, is raising the retirement age and limiting pension credits - for future hires.

"What's really notable about this Baltimore County change," says Kil Huh, research director for the Pew Center on the States, is that "the county cut benefits for existing employees."

Baltimore County lowered eligibility for cost-of-living adjustments and capped COLA increases at 3 percent a year in the new law enforcement contracts. It raised pension contributions required of police and fire employees hired in the past three years from 7 percent of salary to 8.5 percent.

Three years ago, the county trimmed retiree health benefits, boosted retirement ages and sharply cut the calculation for building pension benefits even as the state was fattening it. Under the state formula, retirees with 35 years of service collect 64 percent of pre-retirement pay. Under the county plan, they get only 50 percent.

That still seems more than fair, considering numerous private-sector workers are no longer eligible for traditional pensions of any amount, let alone the retiree health coverage that government workers get.

"If others don't start straightening themselves out, particularly the state, it's going to come back and hurt Baltimore County, just like it's going to hurt other jurisdictions," says Smith, a Democrat who can't serve as county executive again because of term limits and is considering a run for state Senate.

Ironically - and some might say hypocritically - Smith himself will do very nicely from government pensions. He'll take home around $150,000 a year from serving as county executive, County Council member and judge, although Smith notes that the employee contribution rates for those plans are much higher than what most county workers put in.

Public pension rules are so generous it would be hard to find any elected official who isn't making out. Former Baltimore Mayor Sheila Dixon gets her $83,000 annual pension in spite of a plea to a perjury charge. She left the dirty work of cutting pension benefits to Rawlings-Blake.

Public employees are essential. They deserve to be decently compensated, especially firefighters and police.

But these days, the average state and local government employee makes 45 percent more in salary and benefits than the average private-sector worker, according to the Labor Department.

That disparity is not only unaffordable; it's dangerous because it increases contempt for government. More places need to join Baltimore County in pressing what the National Governors Association calls "The Big Reset" button on public pensions.

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