March 15, 2015

Budget committee restores school aid, pay hikes; cuts pension contribution

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McIntosh Busch

Photo above: House Appropriations Committee Chair Maggie McIntosh and House Speaker Michael Busch

By Len Lazarick

Len@MarylandReporter.com

In a unanimous bipartisan vote, the House Appropriations Committee on Friday approved a $40 billion state budget after finding about $250 million to fully restore promised education aid and 2% cost-of-living increases for state employees.

Some cuts in health and mental health programs were also restored, winning the praise of health care advocates.

It was the first time in several years that all the Republicans on Appropriations have voted for a governor’s budget. GOP members did resist some of the more drastic changes to Gov. Larry Hogan’s spending plan, including reductions in pension payments.

“We’ve done it in a way that satisfies a bipartisan group,” Appropriations Chair Maggie McIntosh, D-Baltimore, told reporters.

She noted that the committee preserved $450 million reductions in spending formulas and other cuts. This achieved a 74% reduction in the “structural deficit” in coming years, unlike Hogan’s 100% reduction.

Hogan Budget Secretary David Brinkley gave McIntosh a kiss and congratulated her on a good job, though he later told reporters that the administration would have preferred some different actions by the committee.

“We’re at half time” in the budget process, Brinkley said. “We would have liked to fund virtually everything” the committee chose to restore.

“The good thing is they did it without tax increases,” Brinkley said.

In a statement, Hogan said: “Ultimately, the budget process will not be completed without meaningful discussion on the many tax relief measures our administration has introduced for struggling Maryland families, small businesses, retirees, and veterans.”

2% across the board, pension payment reduced

Left intact was a 2% across the board cut in agency spending on which both McIntosh and Senate Budget Chair Ed Kasemeyer had pressed for more details on how the administration would implement the reductions.

As planned, the committee switched payments into the pension system to the full actuarial contribution but it did not totally eliminate a supplemental payment into the pension fund promised to state teachers and employees when their own salary contributions into the system were raised in 2011.

The state will now pay an extra $75 million into the pension fund each year, not the $150 million expected next year or the $300 million initially promised.

“We get to full 80% funding by 2023” as planned, said Del. Ben Barnes, D-Prince George’s, chair of the pension subcommittee.

“I’m having heartburn for us not keeping our commitment,” Del. Mike McKay, R-Allegany.

“The actual funding is reasonable is if we were doing it the whole time,” said Del. Tony McConkey, R-Anne Arundel. “If we have a couple of bad years [on investment returns], we’re not going to be where we need to be.”

State Treasurer Nancy Kopp, chair of the State Retirement and Pension System Board of Trustees, expressed the board’s rather muted objections to the move.

“The board is concerned that, to the extent proposal for further changes deviate significantly from the reforms adopted [in 2014], such changes … might result in a pattern of reduced funding that threatens the viability of our shared goals to properly fund the System to ensure the full payment of all benefits that have been promised.”

  • Dale McNamee

    I would like to see them do it without raiding other funds, no taxes or fees ( hiked or new ), no new bonds or other borrowing…

    And thank you Legislators for screwing the retirees to do so ! /sarc

    But, you’ll still get your fully benefitted pensions !

    • abby_adams

      Taking care of #1 as always.

      • Dale McNamee

        Yep !

  • Vidi

    So they did it “without taxes” but how about taxes to cover the pension shortfall 10 years from now?

    • Dale McNamee

      Dear Vidi,

      That’s for whoever will be in the Legislature 10 years from now to solve. /sarc

    • mdtruth

      You are kidding right? There is only so much you can actually tax without driving people and businesses out of state (by most accounts, we are past that point).

      Next up will be more pension restructuring to reduce the obligations.

      Some people wonder why Republicans would vote for this budget, why Hogan would sign it, but it seems clear to me. When (not if) it comes time to restructure the obligations, Dems will have no one to blame but themselves.

  • Brian S. McCormack

    Democrats in Annapolis behave like teenagers….spend ever dime, whine about not having any money and (so use to getting bailed out) see not reason to save.

  • JM

    Of course the 2 honchos will try to ruin Hogan. Of course this is the same state that kept a mofo Gov called O’Malley for 8 years