Maryland Governor O’Malley Asks Counties to Share Cost of Teacher Pensions (Upwards of a Billion Dollars Annually)
Maryland is a state in which public school teachers are covered by Social Security. During the 2005-06 school year, employees contributed 2 percent of their gross salary and school districts [taxpayers] paid 9.35 percent for a combined total of 11.35 percent. This is in addition to the 12.4 percent combined employer [taxpayers] and employee contribution to the Social Security system. Teachers become eligible for a full pension based on a combination of age or service. In both Maryland and Pennsylvania, teachers are eligible for full pension if they reach the age of 62 or have 35 years of service at any age. - Teacher Pensions and Retirement Behavior, April 2007Frederick County teachers are receiving a one-time pension rebate from the school system in 2012. The final contract will allow teachers to partially avoid a new state mandate that will require them to pay 2 percent more (making the total 7 percent rather than the 5 percent they already pay) for their pension next fiscal year. The one-time rebate is just one of the features of the contract and could be a way to compensate teachers who would otherwise have to spend at least $814 per year to cover the state pension increase. According to the contract, the school board will use a portion of a $4.9 million fund designated for contract negotiations to cover 1.5 percent of the pension increase next year. The teachers were the only group that asked for the pension rebate, without any consideration for the bad state of the economy or the recent layoffs of employees around the county. - Frederick County School Board Approves Teachers’ Contract, Frederick Gazette, July 14, 2011
O’Malley Asks Counties to Share Teacher Pensions Cost
January 19, 2012Frederick News-Post - The governor's plan to shift teacher pensions to local jurisdictions is estimated to cost Frederick County more than $1.4 million if adopted, even after relief measures water down its impact.
Gov. Martin O'Malley's budget proposal released Wednesday would seek to share the burden of educators' retirement funding with counties to help put the state on sounder financial footing, as well as encourage local jurisdictions to set reasonable limits on salaries and pensions.
"The counties are much closer to the negotiating table than the state is," O'Malley said.
Although the estimated cost of taking on some responsibility for teacher pensions is sizable, it is lower than some in Frederick County had feared.
Commissioners President Blaine Young said he believed the totals might verge on $5 million, but even with the smaller figures coming from Annapolis, he was not rejoicing Wednesday.
"We have a spending problem in this state. ... To me, (O'Malley) is passing the buck," Young said.
O'Malley said his $35.9 billion budget for fiscal 2013 makes $610 million in general fund cuts. Excluding appropriations to the rainy day fund, the proposed budget is about 1.9 percent larger than last year's, he said.
Unlike other states, Maryland handles all employer contributions for teacher pensions, while the counties cover Social Security payments. The governor's proposal would combine the two costs and split them down the middle between the state and its counties.
Frederick County would lose about $9.2 million in the plan. Factoring in an estimated $7.7 million of local relief that O'Malley included to offset the added expense, the proposed split would leave the county with net costs of about $1.447 million, according to state estimates.
More than half of the local relief would come from boosting income tax payments for high earners.
Caps on income tax deductions for salaries of more than $100,000 per year are part of O'Malley's plan. In addition, his proposal would halve personal exemptions for singles making between $100,000 and $125,000 per year and for couples bringing in between $150,000 and $175,000.
The plan eliminates the exemptions for singles earning more than $125,000 and couples making above $175,000.
"I don't like asking for this. I don't like doing this," O'Malley said of the hikes. "But in order to get us through this recession in advance of other states ... there are difficult things we must ask of one another."
In preparing for the announcement about the shift in teacher pension contributions, the Frederick County commissioners and school board members talked about dividing the increased costs, Commissioner Billy Shreve said.
"We have no choice but to make it work," Shreve said.
Angie Fish, school board president, said nothing has been finalized. The school board wants to delve into the governor's proposal before responding to the plan, she said, and she is particularly interested in how the state might alleviate some of the sudden pressure on local budgets.
"To do this drastic change all at once doesn't seem to me like the right way to go about it," Fish said.
Sen. David Brinkley, a member of the budget and taxation committee, in the past has supported reworking the pension funding system, which he said benefits wealthier counties. However, he said he doesn't like the governor's proposed income tax changes on top of the potential for additional increases.
"It's death by incrementalism," said Brinkley, who represents Frederick County.
O'Malley was silent Wednesday about whether he would seek an increase in the gas tax, saying he would take up the issue in later discussions. He said he is looking to double revenues from the flush tax by tying the fee to usage, and added that additional details are on the way.
Sharing the Cost of Teacher Pensions
January 19, 2012Frederick News-Post - Gov. Martin O'Malley is leaving no stone unturned as he seeks to address the state's billion dollar budget deficit.
It was revealed earlier this week that among the measures O'Malley's fiscal 2013 plan includes is a historic change in the way Maryland's public teacher pension plan is funded.
Maryland is among only three states in the union that totally foots the bill for its teacher pension fund -- upwards of a billion dollars annually. Making matters worse, the fund is currently underfunded by about $11 billion.
While all of the devilish details have not yet been revealed, it appears that O'Malley's proposal would save the state an estimated $240 million by shifting half of the yearly pension burden to the counties. O'Malley's proposal would offset some of the counties' new costs by paying one-half of state teachers' Social Security bill.
The governor is also raising state spending on school construction as part of the quid pro quo of the new teacher pension cost-sharing plan.
While this is a bold and dramatic proposal, it has been talked about for years. Many believe that the state has little choice, as the pension fund obligation is enormous, growing annually, and inarguably unsustainable.
The real question, of course, is how this funding change would manifest itself. There are numerous possibilities that could affect various groups, including taxpayers, property owners, teachers and public school students.
If counties are forced to come up with what, in some cases, would be tens of millions of additional dollars, would they raise property taxes? Reduce education spending? If they chose the latter, would they achieve it by revamping their teacher salary schedule; reducing their teacher workforce; increasing class size? Will Maryland's teacher pension program get a haircut? Will the state's standing "maintenance of effort" rule -- which says school funding per pupil should not be lower than the previous year's -- survive?
Some county officials with existing budget shortfalls are balking at this proposal, which would make matters even worse for them. Montgomery County Executive Isiah Leggett has termed it a "non-starter."
That's wishful thinking on his part, we'd say. Though this promises to be a heated debate in Annapolis in the next couple of months, we believe some sort of state-county cost-sharing of this enormous expense is inevitable.
Just what the formula will be and whom it will affect are the real issues.
- In 2009, the average wage for the nation's 108 million private sector workers was $50,082.
- In 2009, the average wage for the nation's two million federal civilian workers was $79,197.
- In 2008, the average salary for federal civilian workers in Frederick County was $73,060
- In 2008, the average salary for local government workers in Frederick County was $45,344.
- In 2008, the average salary for state government workers in Frederick County was $42,120.
- In 2008, the average salary for private sector workers in Frederick County was $42,380.
- In 2009, the average salary for public teachers in Frederick County was $67,150.
What is the average teacher salary in each state?
Salaries for Faculty of State Universities
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