Article: Pension Improvements Gain Support in Maryland General Assembly

Location: Annapolis, Md.
Posted: December 24, 2005 8:55 PM EST URL: http://www.wjla.com/news/stories/1205/288646.html

Annapolis, Md. (AP) - Maryland's pension system for teachers and state employees ranks near the bottom nationally, and sympathetic lawmakers hope to make improvements in the system one of the top items on the agenda for the 2006 General Assembly session.

Whether the system is the worst in the nation, as union leaders claim, is open to question because there are so many variables such as employee benefits, salary levels and how much workers pay into it. But the plan is definitely among the least generous, said Sen. Edward Kasemeyer, co-chairman of the legislature's joint pensions committee.

"I think that from the Senate perspective, there is a desire and the intent to make what I would call a significant improvement," Kasemeyer said. He thinks benefits should be increased during the 2006 session.

House Speaker Michael Busch agreed that something needs to be done soon.

"You can't be the wealthiest state in the union and have the worst pension system for state employees and teachers if you want to compete in the region for the best and the brightest," Busch said. "We definitely need to take some kind of action."

Despite a growing consensus that pension improvements are needed and the rapid growth of tax revenues resulting from a booming economy, there is no guarantee that benefits will be increased next year, certainly not to the extent envisioned by union officials.

Gov. Robert Ehrlich said last week he was still working on his budget and had not decided what to do about pensions. But the governor said demands for increased spending outstrip revenues even with the strong growth in tax revenues.

The Maryland State Teachers Association and the American Federation of State, County and Municipal Employees have organized a lobbying campaign, using a plan put forward by teachers that would cost the state about $480 million a year. About $318 million would go to improvement in teacher pensions and the rest for state employees.

The teachers' association cites information gathered by the National Education Association to back up its claim that the system is the worst in the U.S. An NEA ranking based on the percentage of salary paid to retires as a pension shows Maryland and Hawaii tied at the bottom at 36 percent, but Maryland teachers pay 2 percent of salary for their retirement benefits while there is no contribution by Hawaii teachers.

Based on a national average of $61,100 for the final three years of employment, a Maryland teacher would get $22,974 annually. A teacher with the same salary retiring in Pennsylvania would get a $45,827 pension; in Delaware it would be $35,928 and in Virginia, $31,162, according to the NEA.

But pension system officials say the figure is misleading to some extent because teachers and state employees in Maryland contribute just 2 percent of their pay to the pension plan, a lower figure than in many states.

AFSCME officials say because so many state employees work in low-paying jobs, their pensions are especially low.

Curtis Johnson, 53, who works at Spring Grove Hospital in Catonsville, said if he retired now after 32 years on the job, his pension would be $919 a month before deductions for health insurance.

"Certainly, I couldn't live on that," he said. "I'm working and struggling to get by."

Sue Esty, lobbyist for AFSCME Council 92, said many current retirees "constantly are making decisions between their housing costs, their food costs and their medicine costs with bad results many times."

William Stevens, 70, of Westminster, who retired after 15 years as a state employee, said his retirement check is $208 a month after deductions for health insurance.

"If I didn't live with my daughter, I couldn't make it," he said.

Pension payments are typically based on three elements, average salary over the final three years of employment, number of years of service, and what is called a multiplier, the percentage of the average salary that is paid for each year of service.

The current multiplier in Maryland is 1.4 percent, which would give an employee who works 30 years a pension of 42 percent of the final average salary. But the multiplier was only 1.2 percent before 1998, so workers who were employed before that would get less than 42 percent.

The teachers' association plan would increase the multiplier to 2 percent with retroactivity for previous years worked. That would boost pensions to 60 percent of the final average salary for 30-year employees.

Maryland's employee contribution is low, and the teachers' association says its members have indicated they are willing to pay a bigger share of their salaries to get better pensions - provided the state also increases its contribution.

The MSTA has mentioned 5 percent as a possible target. AFSCME leaders say because so many of their members work in low-paying jobs, they would be hard-pressed to accept an increase of that size.

One of the selling points for proponents of a better pension system is the need to increase benefits to help recruit and maintain teachers as the state faces increasing competition for qualified teachers.

"We're concerned about this for one major reason: our inability to retain highly qualified young and new teachers who begin their careers in Maryland and then pack up and leave," said Pat Foerster, MSTA president.

"We have an excellent school system, but will we be able to maintain it? We will not be able to improve student performance if we are constantly hiring and hiring again for the same positions," she said.

Foerster said when she talks to educators in other states, they know about Maryland's poor pension system.

If the retirement plan is improved this year, "it would be something that every human resources department in the state would put on the top of their list when they talk about why teachers should come to Maryland," she said.

James "Chip" DiPaula, Ehrlich's chief of staff, said the governor looking at ways to boost pensions because of concerns about the ability of school systems to recruit and retain top teachers.

One of the most difficult issues to resolve is the question of retroactivity. Unions representing teachers and state employees argue that fairness dictates that long-term employees should get pensions comparable to recently hired workers and those who will be hired in the future.

But increasing the multiplier to 2 percent for prior years as well as in the future would significantly increase the cost.

Kasemeyer said Senate leaders are looking into the possibility of including some degree of retroactivity in a pension improvement bill, but even legislative supporters of the demand for better pensions say full retroactivity may be more than the state can afford.