Maryland begins potentially painful pension process

ANNAPOLIS — Maryland began on Thursday a nine-month process to examine its underfunded pension system while many of its neighbors and other cash-strapped states across the country have already altered retiree benefits.

The 50 states combined were $1 trillion short of the amount needed to cover retiree healthcare, pensions and other benefits at the end of 2008, according to a Pew Center on the States report released in February. And in 2010, 19 states decided to act.

“There has never been a year in my memory when more states have enacted such significant retirement legislation than 2010,” said Ron Snell, of the National Conference of State Legislatures.

Some of the states shifted from defined benefit programs, like pensions, to mix in aspects of defined contribution plans, like a 401(k). Others raised employee contribution efforts without increasing benefits, and some increased age and service requirements necessary to retire.

Maryland’s $34 billion pension fund has struggled under the weight of investment losses not only in the most recent economic recession, but in the recession that followed the bursting of the tech bubble earlier in the decade. Lawmakers created a commission in the spring to examine the issue and craft a strategy to rejuvenate the system.

“It’s a fire bell clanging in the night,” said Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince Georges, addressing the commission at its first meeting. “It’s a cancer on our budget. It needs to be addressed.”

Casper R. Taylor Jr., chairman of the Public Employees’ and Retirees’ Benefit Sustainability Commission, said he doesn’t expect the group to produce results that can be acted upon by the General Assembly in January.

“All we did was open the book today,” said Taylor, who was Speaker of the House of Delegates from 1994 to 2003.

The commission will look at both sides of the equation of retiree benefits — both the way the system is funded and the type of benefits that are doled out.

A final report isn’t due until June, but unions representing state workers are already voicing their opposition to potential changes to the benefits their members enjoy.

“Above all, it’s key to keep experienced employees in the state government, and that will only exacerbate the turnover problems the state already has,” said Sue Esty, assistant director of the Maryland chapter of the American Federation of State, County and Municipal Employees, which represents 30,000 state employees.

Commission members acknowledged the difficult balancing act of recommending changes to what state employees contribute to their retirement, and to what they receive.

“It was an extremely difficult political task” to enact changes to the pension system, said commission member Barbara A. Hoffman, former chairwoman of the powerful Senate Budget and Taxation Committee.

Said Taylor: “Once we get in the boat ourselves, we have to find a way to get all the special interests in the state in that same boat with us.”

Miller simply called it a “daunting task.”

The pension fund was about $18 billion short of what it will need to cover future benefits at the end of fiscal 2009, and federal stimulus funds due to expire in less than a year have propped up teacher pensions. In Maryland’s current budget, $422 million from the American Recovery and Reinvestment Act was used to fund education, with $240 million going to pensions.


  1. The typical State employee has seen dwindling wages and increased costs this past decade. In six out the past ten years, there has been no cost of living, no step increases. In addition for the past three years the salaries have been cut through furloughs and outright decreases. Prior to that the employee contribution to the retirement plan increased from 2 to 5%. It would be nice to see an article detailing and revealing exactly what has happened to the pension fund and the typical employee salaries versus those with political influence. Mr. Miller acts like state employees have not been cooperative enough in the past 10 years. Ridiculous. Perhaps the legislators’ and judges’ pensions systems, which are much more beneficial, should be particularly scrutinized.

  2. President Miller set the stage yesterday during his opening remarks. He focused on State aid to local governments. Clearly, that was a warning that budget leaders are going to look closely at the teacher pension issue and other forms of aid to local governments in the coming legislative sessions.

  3. The primary problem is not the secretary or janitor pensions, it is the public safety unions who pushed through pension plans calling for retirement after 20 years at 50% of final pay. This means the state is paying someone to retire as early as age 42 fifty percent of their salary for the rest of their lives, potentially another 40 years. Such a model is unsustainable. It is not like these employees are actually “retiring” anyway. They just go get another job and make that much more. I don’t blame them, they are playing the system by the rules. Clearly the rules are broken.

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