March 9, 2012

Teacher pension shift would cost counties $500 million over next four years

Print More

By Len Lazarick
Len@MarylandReporter.com

In the Senate’s proposed budget plan, some of the costs of teacher retirement would be shifted to county school boards over the next four years, not to the county governments next year, as Gov. Martin O’Malley had proposed. But the approved proposal would ultimately force counties to give their school boards $500 million more over the next four years.

Senator Nancy King

Senator Nancy King

The proposal by Sen. Nancy King, D-Montgomery, answered one of the major objections by county officials to the pension shift, since it places the costs on the boards that actually negotiate the salaries tied to rising retirement costs. But in exchange for eliminating that burden, the Senate committee decided to saddle the county governments with more stringent requirements for “maintenance of effort” for funding county schools.

“We’re in some pretty tough times,” King said. “It is probably the best deal we can get.”

Except for unusual circumstances in a poor economy and drastically lower revenues, counties will have to give local school boards the same amount per pupil as they did in the prior year, even if it means raising property taxes above limits set in county charters. Any county that did not meet requirements for maintenance of effort could have its local piggyback income tax revenues diverted directly to the school boards to make up the difference.

Last year, seven counties failed to meet maintenance of effort, according to the state Board of Education, though Anne Arundel County disputes the finding.

‘Radioactive issue’ in Prince George’s

Senators from two counties with voter-mandated tax caps, Sens. Douglas Peters of Prince George’s County and Sen. Ed DeGrange of Anne Arundel, tried but failed to strip the property tax provision.

“It’s really a radioactive issue in our county,” Peters said.

Sen. Rich Madaleno, D-Montgomery, said lifting property tax ceilings was justified by the Maryland Constitution’s mandate for state support of public education, which trumps any county charter provision.

The costs to counties for maintenance of effort due to the pension shift rise quickly from $31 million in fiscal 2013 to $95 million the following year, and $216 million in fiscal 2016.

The Maryland Association of Counties was still clearly unhappy about the pension shift, quoting from testimony it gave on the House version of the bill.

The provisions of the pension shift, MACo said, “undermine the basic authority of county elected officials at the expense of the voters who installed them. Setting both the local share of foundation funding and each year’s maintenance of effort target as absolute requirements, and backing that state law up with a raid on county income taxes, completely transforms MOE from a condition to receive state funding increases into a complete state takeover of county budget decision-making.

“The next decade of county school funding will be essentially set, dollar for dollar, by this statewide legislation. County elected officials will have no actual say in prioritizing resources in an environment of declining tax bases, and will be stripped of any incentive at all to provide any funding in excess of the new state-required minimum.”

  • Pingback: Senate Committee Unanimous: Shift Pensions « Conduit Street()

  • Whcampbell

    The State has badly underfunded and mismanaged the pension fuds for a decade.  Now they want to share the pain.  The Counties and Baltimore City should not have to accept this switch until the pension fund is funded 100%, and not the 65% funding as of today.  This $500 million gift to the subdivisions will mean $500 million in tax increases for everyone.  Most bank robbers go to jail, ours go to Annapolis and sit in fancy buildings figuring new ways to steal!

  • motso1951

    The problem also is the fact that during these tough times, counties gave teachers raises in which the state had no control over and which increased pension costs to the state.