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Christopher Summers: Baltimore’s fiscal future begins now

The news came like a blindside hit on the quarterback: Three days after the Ravens won the Super Bowl in February, independent financial analysts released a report predicting that Baltimore was on collision course with “financial ruin.”

The report from Public Financial Management Inc. found that runaway spending and a vanishing revenue base would create a $750 million public deficit over the next 10 years — a fiscal boulder so big not even Haloti Ngata could move it.

Two months have passed since that bombshell dropped, and it’s starting to yield dividends. Baltimore’s City Council will soon take up an ambitious reform agenda proposed by Mayor Stephanie Rawlings-Blake. Our nonpartisan Maryland Public Policy Institute has reviewed the mayor’s plan, and we believe its two biggest components — pension modernization and property tax relief — are essential to Baltimore’s fiscal and economic renewal.

First, the mayor’s plan requires all existing non-public safety employees to start paying 1 percent of their salaries into the city pension system. Some readers may be stunned to learn this isn’t already happening, but it’s not. The truth is, taxpayer contributions to city employee pensions are growing an astonishing 30 times faster than city revenue. Despite this train wreck in the making, civilian employees aren’t required to contribute a penny to their own retirements.

Thus, the mayor is asking employees to do what private sector employees have done for decades: put some skin in the game of their own retirements. Equally important, the mayor supports shifting all future employees to a 401(k)-style retirement plan, which would dramatically reduce public liabilities.

Michigan enacted similar reforms in 1997 and has since saved taxpayers $167 million. New Jersey’s pension reforms have lowered taxpayer liabilities by more than $500 million in just two years.

Second, Rawlings-Blake has proposed a 22 percent property tax cut for homeowners. Combined with a “demolition surge” of blighted properties, lowering taxes on families will help spur redevelopment, improve the city’s low homeownership rate and edge Baltimore closer to the mayor’s goal of luring 10,000 new families to Baltimore.

Lastly, the mayor has pledged to cut city government’s civilian workforce by 10 percent and require fire service personnel — a formidable political power — to work longer hours to be on par with the rest of America’s big city fire departments.

This is not Rawlings-Blake’s first trip to the reform rodeo. She spent political capital in 2011 requiring city workers to pay more for health care benefits, saving taxpayers $20 million. After decades of evasion, she required independent audits for 13 of the city’s most well-funded agencies.

The mayor’s reform agenda is not without flaws. It fails to relieve employers of high property taxes despite the city’s woefully high office vacancy rate. Even after recent changes, too many city agencies remain exempt from outside audits. Lastly, the mayor’s support for an assortment of taxes and fees risks sending the wrong message to local job creators at a time when Baltimore needs more investment and commerce — not less.

But viewed in totality, the Rawlings-Blake game plan is bold. The question is not whether Baltimore is headed toward “financial ruin;” the question is whether Baltimore’s City Council will make the tough choices required to avoid it.

Christopher B. Summers is president of the Maryland Public Policy Institute, a nonpartisan public policy research and education organization that focuses on state policy issues. He can be reached at csummers@mdpolicy.org.