ANNAPOLIS — Members of a Maryland commission continued to grapple with how to resolve large, unfunded liabilities in the pension and health benefit system for state workers Monday, delaying any decisions until next week after one contested cost-savings option was deemed illegal.
State legislative analysts told the Public Employees’ and Retirees Benefits’ Sustainability Commission they’d been advised by several attorneys that a five-year freeze on cost-of-living increases for retired state employees was not a viable way to resolve funding woes because the state was obligated to uphold agreements already made with state workers.
“You cannot change what has been earned and vested,” Warren Deschenaux, director of the nonpartisan agency that reviews state fiscal matters, said.
The commission hopes to reduce state health care costs by 10 percent. They are also wrestling to get control of a pension system that has unfunded obligations that add up to roughly $33 billion.
Proposals before the commission include transferring perhaps hundreds of millions of dollars in teacher pension obligations to local government systems and increasing everything from insurance premiums to state workers’ co-payments for doctor’s office visits. Commission members are also weighing an option that would require spouses of state employees who are eligible for health insurance through their own job to enroll in their employer’s plan, rather than the state’s program, and increasing the retirement age.
State legislative leaders have frequently suggested transferring the cost of teacher pensions to county governments, arguing that county school boards negotiate labor agreements with educators and should be held responsible for paying for all the costs associated with those contracts.
“The school boards in effect can decide to go for broke without having to figure out how to raise the money,” commission member and former Baltimore area state senator Barbara Hoffman said.
County government leaders say the state needs to uphold their commitment to funding teacher pensions, especially given the massive budget shortfalls most jurisdictions have at this time.
“We are already looking at a $350 million operating budget shortfall between the rest of this year and next,” said Patrick Lacefield, spokesman for Montgomery County Executive Ike Leggett.
In the last session, the state Senate voted to start shifting some teacher pension costs to counties in fiscal year 2012, but lawmakers on a budget conference committee decided to create a commission to study the overall problem.
Maryland’s fiscal situation is even more dire when it comes to retiree health benefits, state legislative analysts told the panel, noting that the state’s trust fund has money for less than 2 percent of the projected cost of such benefits over the next 30 years.
“The state has promised retiree health benefits that it cannot afford to pay,” legislative services analyst Michael Rubenstein said.
Patrick Moran, executive director of the Maryland chapter of the American Federation of State, County and Municipal Employees which represents many state government workers, said labor leaders would “fight tooth and nail” to preserve affordable health care for workers and retiree benefits.
“People come to work for the state because they expect some degree of security,” Moran said.
Former Maryland Speaker of the House Casper Taylor is the committee’s chairman. He has said he hopes the commission will vote on a preliminary report the week of Christmas so they can present it to Gov. Martin O’Malley and the state legislature, which convenes in January.