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February 16, 2012

Circumventing Spending Problems

Blaine R. Young

Gov. Martin O’Malley has a very ambitious liberal fiscal agenda for this year’s session of the Maryland General Assembly. He has proposed new sales taxes, gas taxes, flush taxes, recordation taxes, cell phone taxes, Internet taxes and enhanced income taxes. My guess is he is not done yet.


But one thing that I hope does not get lost in the shuffle is his proposal to shift responsibilities for paying teachers’ pensions from the state to the counties.


You may recall that when the O’Malley Administration announced this plan, we were told not to worry, that the governor had a plan so that he would not harm counties’ budgets. What he didn’t tell you was that the only way he could do this without causing significant budget pressure on the counties was to have the legislature pass all of his new proposed taxes.


In Frederick County alone, the cost to the county for the coming year is $10,281,577 to cover teachers’ pensions under the governor’s phase-in proposal. The fiscal staff in Annapolis says that would grow immediately to $13,243,393 in 2014, and all the way to $15,392,080 over the next three years. This kind of additional burden would put massive pressure onto Frederick County taxpayers, and on the public services our citizens deserve and depend on.


We already hear noise coming out of Annapolis that not all of the governor’s new taxes will pass. Well good! They shouldn’t. But what we are not hearing is how the governor intends to make up for the failure of some of his tax plans to become law, and how that will impact his plan to shift teachers’ pensions to the counties.


And certainly what we are not hearing is why the state, rather than just continue to tax us to death, is not instead discussing how to create a self sustaining pension plan for teachers and other government employees. Rather, Governor O’Malley just continues the liberal Democrat process of kicking the can down the road for our children and grandchildren to worry about at a later time.


The State of Maryland’s pension plan currently is only funded to about of 64% of its obligation. That’s right; it is under funded by 36%. This means that there are $19 billion in unfunded pension liabilities, which doesn’t even include another $16 billion in unfunded liabilities for retiree healthcare obligations. The governor’s plan does not propose to deal with any of this.


Recently Del. Andrew A. Serafini of Washington County presented several bills to the legislature that would revamp the state’s underfunded pension system. As would be expected, thus far they have fallen on deaf liberal ears. In fact, R. Dean Kenderdine, the executive director of the Maryland State Retirement and Pension System, testified against every one of Delegate Serafini’s bills. No surprise there.


The governor likes to say we have to make the “tough choices.” This is a complete mischaracterization of what he is doing. Tough choices would be to get a grip on the expense side of the state budget, rather than just continuing to pound us with more taxes to generate more revenue to pay for more and more government spending.


In Frederick County our pension plan is currently 83% funded, and we are considering a plan to fund it even more. It would be nice for a change to hear something like that coming out of Annapolis.


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