Legislation to change the fire and police pension system could save Baltimore $400 million over five years, according to a report prepared by financial experts hired by the city.
Union leaders and city officials are expected to testify before the City Council's taxation and finance committee today on the bill, which was drafted by Mayor Stephanie Rawlings-Blake's administration, Councilwoman Helen Holton and Councilman William H. Cole IV.
The hearing comes at a tense time: Council members are expediting the passage of the measure, which must be signed into law by the end of the fiscal year on June 30 if the cash-strapped city is to avoid a $165 million bill — $64 million more officials have budgeted.
Last week, the city's police and firefighters unions filed a federal lawsuit against the city and the pension board, claiming that the pension had been "knowingly underfunded" for more than a decade. They asked a judge to bar legislation that would infringe on their benefits.
Union leaders say that reductions in benefits amount to a violation of their members' contracts.
Officials could use the report, prepared by Public Financial Management of Philadelphia, to bolster the city's legal case and document the need for drastic changes to the pension plan.
PFM notes that the city's accrued liability on the plan has tripled to $3.1 billion since 1990, and says that the balance of current workers to retirees is skewed. There are currently nearly 6,000 retirees drawing benefits and about 4,600 active workers, according to the report.
The firm says the changes proposed in the legislation — which include delaying retirement until 25 years of service, gradually increasing employee contributions from 6 percent of their pay to 10 percent and replacing an expensive variable benefit with fixed 1 percent or 2 percent cost-of-living increase — are necessary and bring the city in line with other large municipalities.
The measure under consideration by the council "does not advance more benefit adjustments than necessary to address the current funding crisis," PFM concludes.
Employees with more than 15 years of service would be grandfathered under the current contract terms and would not be affected by several of the changes to the pension plan.
If the committee votes in favor of the bill at today's hearing, it could go to the full council for a vote as soon as Monday.
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