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Serafini's pension system fix could save state, GOP

August 15, 2010

When Del. Andrew A. Serafini tells the truth, his colleagues, including many of his fellow Republicans, head for the hills.

The message - that the state could be brought to its knees by its gelatinous beer belly of a pension system - is considered toxic, especially in an election year.

But Serafini is less concerned with his political career than he is with the $1 trillion question: Why should public pensions be sacred when just about every private pension in America has been scaled back or eliminated altogether?

It's the $1 trillion question because that's the Pew Center's estimate of the gap between what states owe their workers in benefits and how much money they actually have on hand to pay for those benefits.

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In less than a decade, Maryland went from being able to fund 100 percent-plus of its pension obligations to just 65 percent as of the end of the last fiscal year. I don't know if that's a doomsday scenario, as Serafini and several prominent think tanks suggest. But I do know that it's not good.

If you liked the taxpayer bailouts of banks and car companies, you will positively love the pension-system bailouts that appear to be all but inevitable in coming years. However, if you prefer sensible cuts to bailouts, lawmakers such as Serafini are your last line of defense.

But it won't be easy, if it happens at all.

The New York Times predicts an inevitable class war because the "have-nots," the people in America without pensions, will be asked to pay (with their tax dollars) for the pensions of the "haves," those being primarily government workers.

But the haves are not expected to retire, so to speak, quietly into the night. They might be older, but their memories are still good, and they are bound to remember, unfavorably, any politician who might try to save the state from bankruptcy at their expense.

Even such minimal measures as reducing cost-of-living increases have met with lawsuits in other states.

Those with pensions have a fair enough point: Their money has been promised them, and as such, it takes on the cast of deferred compensation. You can't renege, any more than you could decide not to pay part of the bill of a contractor who built a city park.

That would be true, unless the government went belly up and the contractor received no money at all. Given the choice, he might logically seek a compromise that would both protect the solvency of the state and guarantee him at least some of his earnings.

But no one ever wants to compromise anymore. And we certainly don't want tax increases. This means we should cut programs or limit spending, but of course we never do that, either, because it's bad politics. That is why the pension issue is so toxic, even among the Republicans who should be its strongest supporters.

At least that's the shallow view. To some degree, it insults the intelligence of past and present state employees, many of whom probably do understand that a hard line against any pension reform risks an implosion of the entire system down the road.

And Serafini does not propose cuts to existing employees, to whom the promise of pensions already has been made. But he says that the rules need to change for new employees hired by the state.

Public employee unions across the country say any tinkering with the system is bad medicine. Their job, as they see it, is to protect employees who aren't employees yet.

But when just about all of private business has moved on to retirement accounts based on 401(k)s, what logic tells us that state workers should be treated any differently?

And one last tidbit that unions are unlikely to pass along: If you are just entering the job market and you have a choice between a 401(k) funded by you and a state pension funded by taxpayers, the smart move is to handle your retirement accounts yourself.

Your take-home pay will be slightly less throughout your career, but when you hit 59.5 years of age, you'll be sitting on a granddaddy of a pile of cash that those who rely on state-funded pensions alone only could dream about.

If it wasn't so busy hypnotically dangling gays and Mexicans in front of our eyes, the Republican Party in Maryland could take up this issue and make a good case that would appeal to sober-minded taxpayers and state employees alike. It would be a chance to demonstrate to voters that it is a serious party capable of dealing with serious issues and suggesting serious solutions.

It might even restore a good bit of credibility to a party that, in the past, barely has had enough money in its checking account to send out for pizza. Andrew Serafini undoubtedly sees the pension issue as a way to save the state, not the party. But properly framed, there's a chance that it could be both.

Tim Rowland is a Herald-Mail columnist. He can be reached at 301-733-5131, or by e-mail at timr@herald-mail.com">timr@herald-mail.com. Tune in to the Rowland Rant video at http://www.herald-mail.com, on antpod.com or on Antietam Cable's WCL-TV Channel 30 evenings at 6:30. New episodes are released every Wednesday.

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