Baltimore City leaders want to raid the rainy day fund to finance more police officers. But whether the city can afford to pay for the healthcare and retirement benefits for those already in the force ? and every other city employee ? without a massive tax hike or cuts to benefits is increasingly suspect.
Earlier this week the Board of Estimates moved to create a trust to pay for an estimated $2.9 billion unfunded health care liability for city retirement benefits. That obligation is $800 million more than the $2.1 billion 2008 city budget.
So far the city has set aside $15 million to pay for that $2.9 billion bill. Talk about taking the minimum payment route.
The only reason we?re finding out about this now is the Government Accounting Standards Board regulations require state and local governments to disclose future liabilities for retiree health and other benefits starting in fiscal 2008, which starts July 1. Governments already had to disclose pension liabilities.
City Finance Director Edward Gallagher said, “I feel comfortable as long as we?re getting started.” He declined to comment about what would be an “appropriate” contribution to the retiree health care fund each year for it to remain fiscally sound.
The liability translates to $4,613 per person in the city. Take those on government assistance out of the population equation and the rest of us will owe an even higher number, and that is on top of the already extortionate property taxes we already pay.
Funny, we don?t remember former Mayor Martin O?Malley highlighting this issue during his campaign for governor.
Residents already must finance a huge and growing pension liability for city employees. The fiscal 2008 budget gives $118 million for pensions ? 4.4 percent of the budget. That may not seem like a lot in the scheme of things but it represents more than a 400 percent increase from 2000, when the city contributed $25 million, or 1 percent of the budget, to pensions. If expenses mirror recent growth it means the city could owe more than $475 million for pensions alone in 2016 as budgets remain virtually static.
Is the city really prepared to spend more than 20 percent of its budget on pensions? What happens if health benefit obligations require the city to match pension contributions?
That could mean nearly 50 percent of the budget could be eaten by financing retiree benefits in the not so distant future.
Barring a massive influx of new residents in a city still shedding them, the inevitable answer to the problem is major tax hikes or massive cuts to city services. But when only 20 percent of the population working in the private sector receives the cushy defined benefit pensions government employees get, is it fair to ask the rest of us to pay for lush retirements we will never receive? Or to work until 80 so that those in city government can retire at 60?
The only fair solution for everyone is for the city ? and all levels of government ? to start bringing their employees? benefits into line with those of us who have to pay for them. Period.
