New ideas to better the Old Line State
Market worsens public pension crunch
Originially published in the Baltimore Examiner
By Jaime Malarkey, Examiner Staff Writer
Published on Friday, October 31, 2008
MPPI IN THE NEWS
Maryland and local governments must reconsider retirement benefits for its employees, according to two think tanks who said already underfunded pension coffers will take additional hits with the stock market drop-off.
The state's retirement and pension system suffers an $11 billion unfunded deficit, according to a new study. The report blames the administrations of Democratic Gov. Martin O'Malley and his Republican predecessor, Robert Ehrlich Jr., for skimping on annual contributions to pension plans while expanding benefits to public employees.
"The response of both the Robert Ehrlich and Martin O'Malley administrations to this impending crisis has been defined by the principle, ‘When you're in a hole, dig deeper,' " wrote George Liebmann, executive director of the Calvert Institute for Public Policy, which co-authored the report with the libertarian-minded Maryland Public Policy Institute.
Maryland's unfunded retirement benefits liabilities, including health care, range from $8 billion to $15 billion, Liebmann said. Local counties are running pension deficits ranging from $900,000 in Carroll to $674 million in Montgomery, he said.
The numbers are substantially worsened by the recent fall in the stock market, which will be gradually factored into the actuarial deficits over the next five years, Liebmann said.
On average, public pensions dropped 14.8 percent in value for the year that ended Sept. 30, according to investment firm Northern Trust.
That was before the market plummeted, and whether or not the state recoups those losses is anyone's guess, said R. Dean Kenderdine, director of the state's retirement fund, more than half of which is invested in stocks.
"At this point, given what the market has done over the last weeks and months, I'm not going to project where we're going to be," Kenderdine said.
The General Assembly in 2002 adopted a new formula for calculating the state's pension contributions to stifle year-to-year volatility, Kenderdine said. The state's pension board has urged lawmakers to abandon that formula - exacerbated by enhanced benefits - in favor of returning to full actuarial funding.
Del. Murray Levy, a Charles County Democrat who sits on the legislature's joint pension committee, said curtailing benefits for future employees is the "only option that has a chance of being discussed."
Levy said unfunded retirement benefits other than pensions, like subsidized health insurance premiums, are at a greater risk for cuts.
"There is no money in the till for that," Levy said. "Not one penny."
Unfunded pension deficits through June 2007.
Numbers are in millions
County Costs 2003 Costs 2007 Unfunded
Deficit
Anne Arundel $23.8 $35.7 $ 62.1
Baltimore City $17.7 $36.8 $151.5
Baltimore City
Police/Fire $34.7 $54.6 $235.2
Baltimore County $16.2 $36 $188.4
Howard County $12.5 $24.6 $15.3
For more on the report, visit this page at mdpolicy.org.
jmalarkey@baltimoreexaminer.com
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