By Len Lazarick
A new study for a conservative think-tank criticizes the large unfunded retiree benefits of the Prince George’s County Public Schools, saying it threatens to “crowd out” increased spending on education.
The study for the free-market Maryland Public Policy Institute by Larry Maloney of Aspire Consulting and Jay May of EduAnalytics pegs the future costs of other post-employment benefits (OPEB), mainly health insurance, for school system employees at $3.1 billion. The pension system for which the county picks up half the costs had $1.4 billion in county liabilities.
School system officials pointed to its annual financial report which showed the pension liability reduced to $1.2 billion in 2017, but the OPEB liabilities still stand at $3.1 billion.
The Government Accounting Standards Board requires the listing of these long-term liabilities which will not become due for decades in some cases.
State retirement system officials, who manage the teacher pension system, said current figures for the pension system show it is better funded than shown in the think-tank study because changes made by the legislature in 2011 lowered some benefits and increased employee contributions. More recent changes in law have also increased the state contribution and set up a schedule for paying off the accumulated liabilities.
Based on fiscal 2017 valuation of its portfolio, the pension system is now almost 72% funded, and is on track to reach 80% by 2026.
“These troubling findings show that state and county leaders simply aren’t doing their homework,” said Christopher B. Summers, president of the policy institute which has been a persistent critic of the state pension system. “County taxpayers and school system employees deserve stronger policy leadership, such as expanding rainy-day funds to help reduce unfunded liabilities and to ensure that retirees get the health benefits to which they are entitled. Not addressing the problem now only makes the future worse for employees, students, taxpayers, and future generations of students.”
While the study focuses only on the Prince George’s County school system, other counties face the same predicament, according to their annual financial statements. Montgomery County Public Schools, the largest system in Maryland, for instance, has almost $2 billion in pension liabilities, and $2.6 billion in OPEB liabilities, lower than Prince George’s because Montgomery has been setting aside more money for retiree benefits.
Baltimore County Public Schools have about $1 billion in pension liabilities and $663 million for retiree benefits.