Please ensure Javascript is enabled for purposes of website accessibility

O’Malley wants to short pensions to fund budget

ANNAPOLIS — A proposal to reduce reinvestments to the Maryland State Retirement and Pension System by $100 million a year could ultimately cost taxpayers $1.75 billion over the next two decades.

Nancy Kopp

Treasurer Nancy K. Kopp and Comptroller Peter V.R. Franchot speak about a proposal by Gov. Martin O’Malley to reduce state contributions to the employee pension system by $100 million annually. Kopp and Franchot, respectively chair and vice chair of the pensions board, oppose the reduction. (The Daily Record/Bryan P. Sears)

The increased costs would result from a proposal by Gov. Martin J. O’Malley to partially renege on a promise to invest $300 million a year from the state into the pension system.

“Over the short term, the cut does put some money in the general fund,” said state Treasurer Nancy K. Kopp, who is also the chair of the state retirement system. “Over a period of time it will cost $1.75 billion more to the employer — the taxpayer.”

Kopp and Comptroller Peter V.R. Franchot, who is vice chair of the pension system board, appeared Wednesday before the Senate Budget and Taxation Committee to urge against the proposed cuts.

The increased cost over the next 25 years includes annual payments that would be eliminated, plus accrued interest, according to Kopp.

Kopp’s criticism of the O’Malley plan is noteworthy because she is a frequent ally of the governor on the Board of Public Works.

The proposed reduction of $100 million a year is part of a budget plan submitted in January by O’Malley that is intended to help close a structural budget gap.

“We’re trying to reach a point where we don’t have structural budget deficits,” said state Budget and Management Secretary T. Eloise Foster, who added that if the state didn’t keep one-third of the promised $300 million in annual reinvestments “we’re just setting ourselves back.”

The O’Malley proposal to reduce the reinvestment by $100 million this year and every year thereafter would break a 2011 agreement he made with unions that represent state employees.

In that year, O’Malley promised to reinvest $300 million annually related to retirement plan savings that were part of reforms he sought to stabilize the defined benefit system. As part of the package, employees were asked to contribute higher amounts for lower benefits.

The goal of the reforms was to get the system funded to the 80 percent level by 2024. Currently, the system is at a 65 percent funding level.

Foster said taking back $100 million annually will not hurt long-term plans to fully fund the pension system. Under O’Malley’s current proposal, the system would be fully funded in 2025.

Members of the Senate Budget and Taxation Committee expressed concern about the reduction but said there may be few other options.

“We have to make some decisions,” said Sen. Nathaniel J. McFadden, D-Baltimore. “If you don’t want us to go here, where do you want us to go?”

Franchot offered little in the way of an alternative.

“If I could, I’d wave a magic wand and send (the budget) back,” said Franchot. “These cuts should never have been baked into the budget.”

Time is running out for the Senate committee to find its own solutions.

“We have to come up with an answer in seven days,” said Sen. Edward J. Kasemeyer, D-Howard and Baltimore Counties, who also chairs the committee. “We don’t have the luxury of coming up with a new budget or sending it back.”

//

1 of 1 article

0 articles remaining

Grow your business intelligence with The Daily Record. Register now for more article access.