We are not grateful for the financial crisis choking state and local government budgets around the nation. But as Rahm Emanuel, President-elect Barack Obama’s chief of staff, told a Wall Street Journal conference of chief executives recently, “You never want a serious crisis to go to waste.” In that spirit, we think it is wise for Gov. Martin O’Malley and legislators to discuss pay freezes and furloughs for state employees to lighten the load on already cash-strapped taxpayers who face a budget deficit of about $1 billion in the next fiscal year starting in July. The idea was floated a couple of months ago and scrapped, but O’Malley said it was back on the table again Monday in his new MPT program, “Ask the Governor.”
The state’s top fiscal analyst, Warren Deschenaux, outlined the grim news last week. He said even if salaries are frozen the cost of fringe benefits will be more than 40 percent of payroll in four years, compared with 30 percent three years ago.
He recommends reducing some benefits to manage big increases in coming years. We agree. This is more important than making one-time cuts, as benefits will come back to haunt taxpayers year after year. For example, actuaries for the state pension system said the state would have to increase its pension payments by $100 million each year for both 2010 and 2011 on top of the $1.1 billion it already is spending each year. That works out to a tax of about $575 per every private sector worker next year — before health care benefits for retirees are added in. Added up, to balance the unfunded promises politicians already have made to public employees, every private sector taxpayer would have to write a $24,000 check right now.
Other states are reducing monthly payments for pensions or raising the amount employees must contribute to their retirement. And Orange County, Calif., voters overwhelmingly supported a measure on Election Day to require any increases in public pension benefits to first be put to a vote of the people. We wonder if the big increases to teachers’ pensions would have passed two years ago if the issue first went to Marylanders for approval.
What’s clear is that piecemeal cuts won’t be enough to balance the budget this lean year or in fatter years hopefully to come. Neither will a roaring stock market nor fat federal government spending in the state cure “structural” overspending. That’s why, as Emanuel said, our legislators and governor should use this downturn to promote the good. That means making tough decisions about pensions and other benefits for public employees that put costs in line with what taxpayers can pay, not just what the unions want.
