As Baltimore City finalizes its budget, it should look to Howard County for financial advice.
Howard County Council members are considering creating a trust fund to pay for county retiree health care benefits. Baltimore City already has one. But it acts as if it expects returns akin to Hillary Clinton?s 100 fold return on her cattle futures investment considering the paltry sum it contributes to finance that debt.
The city set aside $15 million as a down payment on its $2.9 billion liability in this year?s budget, and Edward Gallagher, the director of the city?s Department of Finance, says it will likely contribute a similar amount in next year?s budget. By comparison, Howard contributed $14 million on a $477 million liability this year. If the city followed the same rules, it would have contributed $85 million.
The bad news is Howard officials said the county should set aside about $53 million to adequately cover its debt obligations. If the city followed that rule, it should contribute $322 million next year toward its retiree obligations, which will only grow as health care costs rise.
That figure represents 15.4 percent of the city?s 2008 operating budget ? or more than the city spent on schools last year and about the same as it spent paying for general government services. To further put that $2.9 billion in perspective, it equals $4,593 per person in the city.
Gallagher has repeatedly declined to say what he thinks would be an “appropriate” amount for the city to contribute to cover its debt obligations for retiree health benefits.
Maryland?s former secretary of the Department of Budget and Management, Cecilia Januszkiewicz, said most jurisdictions are likely putting in what they can afford ? a number disconnected from actual costs of providing service.
The bigger question for Baltimore City and for every county is whether local governments should be financing retiree health care benefits at all or at the very least in a less expensive form. Most taxpayers do not enjoy retiree health benefits, and fewer have them each day as employers cut them to save money. It follows that taxpayers should not have to foot the bill for care for government workers that taxpayers themselves will never receive.
At a minimum, the City Council and county councils around the state must consider providing retirees with a set payment they can use to buy insurance individually instead of paying for all of their benefits. That would reduce taxpayer liabilities and ensure retiree benefits do not cripple local governments? ability to adequately pay employees, fund schools, roads and other essential services.
