Pension System

The gravy train for Baltimore police and fire retirees is nearing the last station. For 24 years, retired members of the city police and fire departments have profited from a unique feature of their pension system that increased their benefits when pension fund investments performed well. If the investments perform poorly, retirees didn't suffer; instead, the city simply paid more into the plan. But the city no longer can afford to keep this train running. The feature had the costly effect of increasing a retiree's base benefit that the city had to fund, which added to its financial burden.

The actuary for the state employee pension system told lawmakers yesterday that the retirement fund is sound and that the impact of its investment losses has been overemphasized. Gene Kalwarski, a principal in the Milliman USA actuarial firm, defended the system's investment strategy, which was criticized by experts contacted by The Sun. He said the large investment in international stocks, while costly in the fiscal year that ended June 30, had been successful the year before. "My feeling is that this is a very strong system," Kalwarski told the General Assembly's Joint Committee on Pensions.

Maryland Treasurer Richard N. Dixon dismissed as irrelevant yesterday a national survey ranking the state employee pension system last among its peers in investment performance. In his first comments since the rankings were released last week, Dixon said he was not aware of the state's poor rating until it was reported in The Sun. "I don't really consider that information relevant because it's against unnamed peers," Dixon said in a brief telephone interview. The rating by Wilshire Associates measured the investment performance of 38 large public pension systems for the fiscal year that ended June 30. The Maryland system's return on investment was minus-9.

With much of its money tied up in a plunging stock market, Maryland's state employee pension system ranked last among its peers in its investment performance last year, according to a leading tracker of public retirement funds. The State Retirement and Pension System of Maryland lost 11.2 percent of its total asset value in the fiscal year ended June 30, according to a report to be delivered to a legislative committee today. Valued at $33.1 billion at the end of June 2000, the system was worth $29.4 billion a year later.

Baltimore County Councilman Kevin Kamenetz deserves credit for drafting legislation that would rein in the council's absurdly generous pension system, which pays any councilman who retires with five terms of service 100 percent of his annual salary for life. That's about to happen for the first time in county history when Councilman Vincent J. Gardina retires after his term ends next year, earning him $54,000 annually, ad infinitum. Not bad for a part-time job. The council has had plenty of opportunities over the years to address a benefit that has grown out of all proportion to its original intent (council salaries were $3,000 a year when it was first established in 1971)

Bankruptcy and debt default are a real possibility for cities around the country that can't pay their bills, largely caused by lavish retirement and health care benefits for employees that taxpayers couldn't afford even in good times. Los Angeles is headed down that road. Vallejo, Calif., filed for bankruptcy in 2008. Closer to home, Harrisburg, Pa., is exploring the option as a way to restructure bills it can't pay. And last week, Warren Buffet said at a hearing of the U.S. Financial Crisis Inquiry Commission in New York that his Berkshire Hathaway Inc. has been cutting its exposure to municipal debt because he foresees "a terrible problem" with state and local bonds.

Maryland's state employee pension system, which had such poor investment returns three years ago that it finished last in a national ranking, now falls among the top half of its peers. The state's 46th-percentile ranking in a Wilshire Associates survey comes after a period of reform in which the system's top officials were replaced and investment procedures were overhauled. The survey results, announced yesterday, compare the system against other large public pension funds for the fiscal year that ended June 30. The pension system's fortunes changed significantly as it posted a $3.5 billion gain for the fiscal year - a 16.16 percent rate of return on investments.

Beginning tomorrow, you will pay more to renew your vehicle registration in Maryland, may find slightly older milk on your store shelf and can, if you like, hunt deer on certain Sundays in some areas of the state. Also tomorrow, Maryland will become the 40th state in the nation with a law that makes it easier to establish a charter school, according to the U.S. Department of Education. In all, 125 new laws will go into effect tomorrow after being passed by the General Assembly and signed by Gov. Robert L. Ehrlich Jr. this year.

WASHINGTON -- The House of Representatives passed legislation yesterday designed to shore up the nation's defined-benefit pension system, but backers still must resolve differences with the Senate and overcome White House warnings that the legislation isn't tough enough. The House voted 294-132 to clear the Republican-backed bill, with 70 Democrats joining most Republicans in support after the bill's sponsors agreed to change provisions regarding future pension benefit increases and benefits for employees affected by plant shutdowns.