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Some pension costs could shift to counties

February 10, 2009|By ERIN CUNNINGHAM

ANNAPOLIS -- Lawmakers are criticizing a proposal to shift some pension costs to counties, saying the added expense could lead to higher property taxes or reductions in county services.

Pensions for teachers, other school system employees and community college staff would become partially a county responsibility under a bill being considered by the Maryland General Assembly.

Lawmakers have estimated that Washington County could need about $6.5 million to meet that need.

"Obviously, it's going to have a significant impact on the county," said Washington County Commissioners President John F. Barr. "It's one of the ways the state is trying to balance its budget ... passing its responsibility onto the counties. We wouldn't be happy about it, that's for sure."

Senate President Thomas V. Mike Miller Jr. introduced the bill Monday.

The state now shoulders the entire cost of teacher pensions, which total about $770 million annually. Despite reports that the state's pension fund, which is invested in the market, declined during the country's recent economic crisis, Gov. Martin O'Malley's proposed budget did not call for counties to participate in pension payments.

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During a delegation event last year, Del. Andrew A. Serafini, R-Washington, said the state's pension fund balance was at $44 billion in early 2008. By September, the value of those investments dropped to $39 billion, and by December, the balance was $29 billion -- a loss of $15 billion.

Serafini opposes Miller's bill, but said any changes to the pension system would not impact current retirees or those already vested.

Serafini said he has been studying the state's pension system and would not recommend shifting the state's contribution to the counties. He said the impact on Washington County would be "devastating."

However, Del. John P. Donoghue said Tuesday that he is hopeful the federal government's economic stimulus package will provide enough funds for the state that the bill regarding pensions is no longer needed.

"Counties obviously don't have the money," said Donoghue, D-Washington.

Del. Christopher B. Shank, R-Washington, said he is "totally opposed" to shifting pension costs to the county.

"I feel that it would be a very bad idea," he said. "It's shifting the burden to local government at a very bad time and would inevitably result in local government being forced to raise property taxes."

Shank said local residents have told him property taxes already are too high. He said the state should honor its commitment to retirees and not "pass the buck."

Serafini and Del. LeRoy E. Myers Jr., R-Washington/Allegany, met with state Treasurer Nancy K. Kopp last week to discuss the state's pension fund. Myers said they discussed the types of investments being made with the fund and how to better protect them.

In 2007, Donoghue sponsored a bill similar to the one proposed by Miller that would have made counties responsible for half of the employer pension contribution for teachers, librarians and others.

Donoghue said Tuesday that in 2007 he was asked by the Speaker of the House to sponsor the bill so the issue could be discussed.

"It never went anywhere, and we all knew it wouldn't," Donoghue said.

Myers said legislation that would place the burden of retiree pensions on the county is a "horrible" idea. He said counties in Western Maryland are the least able to afford the additional expense.

Barr said he is hopeful the county would not be forced to raise property taxes if the bill passed. He said it is more likely that the local government would have to do away with services to residents.

County Commissioner Kristin B. Aleshire agreed.

He said shifting the responsibility to provide pensions does not solve the problem.

"The state cannot expect to fix its financial difficulties by passing off those types of necessary costs and continuing to spend money on other things," Aleshire said. "Two years from now ... they'll be passing something else on, and still spending."

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