How Much Would the Counties Pay for Teacher Pensions? (Updated)

One of the options under consideration in Annapolis for closing the state’s potential billion-dollar budget gap is passing down funding obligations for teacher pensions (currently paid by the state) to the counties. We obtained the following FY 2009 data for the size of those obligations by county from the state’s Department of Legislative Services.


In absolute dollar terms, Montgomery is the leader. The state is paying $131 million to fund pension liabilities for Montgomery’s teachers and some of its community college employees. (This is far lower than the $217 million reported by the Gazette in July, but we will trust DLS for our data.) Prince George’s County ranks second ($95 million) and Baltimore County ranks third ($78 million).

Now here are those costs expressed in per capita terms:


The average cost statewide is $116.77 per resident to fund pension obligations for teachers, community college employees and some library employees. For Montgomery’s teachers, the cost is $140.62, the highest in the state behind Howard County ($159.52) and Calvert County ($142.99). If the state sent teacher pension obligations down to the counties, these three would be hit disproportionately hard. And for Montgomery, which is already facing a $251 million deficit, the budget impact would be cataclysmic.

Why do these counties incur larger pension obligations than others? In the case of Montgomery and, to a lesser extent, Howard, it may be that higher costs of living have led to higher compensation. Another possible explanation is that all three counties are known for excellent schools and perhaps they have found that higher teacher pay is linked to better performance.

The above data may actually understate the threat to Montgomery County from a transfer of teacher pension obligations. One option that has been considered in the past has been to require counties to partially fund pensions, with “rich” counties paying higher shares than poorer counties. For example, Delegate John P. Donoghue (D-2C) of Washington County introduced a bill during the special session that would have required the counties as a whole to contribute 50% of pension costs subject to a wealth formula. Donoghue’s formula would have required Montgomery to pay 63% of its pension costs while Donoghue’s home county, Washington, would only have had to pay 44% of its costs. Is there any idea that could be more openly opposed to Montgomery’s economic interests than this one?

Two other developments occurred this week on this issue.

1. On September 23, the Baltimore Sun reported that Baltimore County was in negotiations with the state government on accepting partial funding responsibility for teacher pensions:

Baltimore County and state officials have talked about various options for sharing the costs, [County Executive spokesman Donald I.] Mohler said. The expense could be shared equally between the county and state. Or the county could begin paying a percentage, or perhaps just the annual increase, which would be $4.6 million a year.

Baltimore County Executive Jim Smith took great exception to this article and released the following statement the next day:

Smith Reiterates His Steadfast Opposition to Pension Shift
Shift of Pension Costs to Counties Would Have Dire Ramifications

Towson, MD — Reacting to a recent news story that erroneously reported that Baltimore County was in discussions with state officials regarding the shift of pension costs to local government, Baltimore County Executive Jim Smith issued the following statement:

“I want to make it clear that at no time has Baltimore County entered into any discussions with the state or any state officials regarding transferring the funding of teacher pensions from the state to local governments. Such a shift of pension costs to Baltimore County would result in a $78 million hit to Baltimore County’s budget that would have draconian budget ramifications for county citizens. Let me make it very clear, and my position has been consistent: the shifting of the state’s responsibility for teacher pension costs from the state to local government is wrong and simply unacceptable.

As the President of MACO, I have been pushing for the passage of the slots referendum and its critical funding for education. The discussion of shifting teacher pension costs to local governments makes it clear how important the passage of that referendum will be to county taxpayers.”

2. Governor O’Malley told Maryland Moment that he would “rather not” send teacher pensions to the counties. As a former mayor, the Governor has consistently opposed the idea since before the special session. But the Governor is only one player in this process; the Senate and House leaders will have their opinions on the issue too. We recall that the Governor did not suggest the computer tax during the special session but that did not stop the legislature from proposing, passing and ultimately retracting it anyway. We hear that if slots are not approved and out-year deficits project into the hundreds of millions of dollars annually, everything – EVERYTHING – will be on the table.

Update:
The dust-up between Baltimore County Executive Jim Smith and his spokesman, Donald Mohler, is incredibly revealing. Baltimore Sun reporter Larry Carson quoted Mohler on the record that the county was in discussions with the state over accepting part of the pension liabilities. That no doubt generated some angry phone calls from other County Executives and produced Jim Smith's denial.

But is it true? Mohler had no reason to lie to the Sun. In fact, it is entirely possible that Mohler was not told that the discussions were secret. Carson may be onto a much bigger story than he knows.

So if some counties are negotiating favorable deals with the state - thereby minimizing their liabilities if teacher pensions are passed down - guess who will be left holding the bag?