ANNAPOLIS — Maryland Gov. Martin O’Malley would direct 87 cents of every dollar saved through his pension reforms to help plug the state’s fiscal 2012 budget deficit — rather than pay down the state’s $19 billion unfunded retirement liability — according to budget analysts. The state would save roughly $120 million in fiscal 2012 from O’Malley’s proposed changes, which would require teachers and state workers to pay higher contribution rates or accept a lower level of benefits, among other measures.
Also in Annapolis
| Gov. Martin O’Malley introduced his legislative agenda Monday, including: |
| • Legislation that would make it a crime to intentionally fail to provide necessary assistance and resources for a minor, unless a lack of money is the sole reason. |
| • Legislation to allow independent home health care providers to engage in collective bargaining activities with state agencies. |
| • Funneling $100 million in tax revenue to biotech and science startup companies through a venture capital fund called Invest Maryland. |
| • Providing $1.5 million in tax credits for electric-car buyers. |
| • Appointing an “Electric Vehicle Infrastructure Council” to help the state continue to expand its infrastructure, as well as its demand, for the cars. |
| • Ordering utilities to buy offshore wind energy in 20-year contracts. |
Typically, it would take the state at least a year to reap savings from pension changes. But O’Malley has asked the General Assembly for the authority to expedite savings by paying less into the system than planned in fiscal 2012, according to state policy analyst Michael Rubenstein.
“Usually there is a one-year lag when there are changes made to the pensions system,” Rubenstein told the state’s House and Senate budget committees on Monday.
“In this case, the governor’s language in the [budget bill] is authorizing him to essentially underfund the contribution rates that have been certified by the pension board.”
O’Malley would direct $104 million of the estimated fiscal 2012 pension savings into the state’s general fund “for the purpose of balancing the budget,” Rubenstein said.
The remaining $16 million would help pay down Maryland’s $19 billion liability in retirement benefits promised to future retirees.
The governor would capture another $60 million from fiscal 2013 pension savings. By 2014, the state would begin reinvesting all savings back into the pension system.
An economic consultant for the Maryland General Assembly advised the Senate Budget and Taxation Committee last week to switch new employees to a 401(k) system to clamp down on the state’s unfunded liabilities.
House of Delegates Minority Anthony J. O’Donnell said lawmakers should lead the way by switching the General Assembly to a 401(k) system.
“[O’Malley’s] proposal is nibbling around the edges of the problem,” said O’Donnell, R-Calvert and St. Mary’s counties. “The governor’s plan is to preserve the current system, but the current system will bankrupt the state.”
The entire pension system, including $16 billion in unfunded health benefits for current and future retirees, is 64 percent funded.
The system was almost fully funded in 2002, when lawmakers began paying less into the system than what was owed.
Maryland’s system is scheduled to reach an 80 percent funding level in 2023 — three years ahead of schedule — with O’Malley’s reforms.
