Md. dollars for schools or pensions?

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AS A MATTER of policy, Maryland Gov. Larry Hogan was absolutely right when he said that lawmakers in Annapolis are trying to “rob the pension fund” on which tens of thousands of current and retired state employees depend or will depend for their income and health coverage. His ability to stop them from doing so may be limited, but that’s not stopping him from trying.

On Thursday, Mr. Hogan, a Republican, announced that he intends to shift tens of millions of dollars to shore up the anemic pension fund, including money that lawmakers had earmarked for public schools.

The governor’s move may trigger resistance from the Democratic-dominated state legislature, which raided catch-up payments to the pension fund starting last year and doubled down this year. In addition to funding schools, the Democrats insisted that a disputed pool of about $200 million be used to give state employees a 2 percent raise and for several health programs to benefit pregnant women and the poor.

Mr. Hogan, elected last fall, has been true to his pledge to govern from the middle. Sensibly, he conceded on the state employee salaries and on the health programs, thereby demonstrating that he is no doctrinaire conservative.

The governor drew the line at $68 million in supplemental education funding, which is intended to help school systems pay their bills in high-cost areas of the state, including Montgomery and Prince George’s counties and Baltimore City. The schools could use that money, but the amounts involved — about 1 percent of the schools budget in Montgomery and Prince George’s, which the governor would withhold for one year only — are not enormous.

By contrast, the lawmakers’ flip-flop on pension funding is likely to damage Maryland’s budgetary and fiscal condition for many years to come. In the words of the legislature’s own chief budget analyst, slashing the state’s annual contributions to its already-underweight pension fund would impose an “eye-popping” burden on taxpayers — which he estimated at $2.5 billion — in coming decades. When the bill comes due, most current lawmakers will have retired.
In 2011, then-Gov. Martin O’Malley (D), alarmed that the pension fund’s liabilities exceeded its assets by billions of dollars, persuaded the legislature to devote $300 million annually in supplemental appropriations to the pension fund. The relatively modest goal was to lift it to 80 percent of full funding by 2023.

That pledge of budgetary good behavior proved too difficult for lawmakers. Last year, they broke the reform plan’s promise by slashing the catch-up contributions in half to $150 million.

This year they did it again, leaving the payments at just $75 million — and saddling future taxpayers with a huge bill.

Mr. Hogan correctly labeled the raid as irresponsible. He intends to divert funds from several sources, including the schools money he is refusing to spend, to restore that $75 million.

The legislature may push back, but it will be on shaky policy grounds if it does. Just four years ago it agreed that the pension fund was a priority. Now, with a Republican governor, it has churlishly changed its mind, despitewarnings from bond-rating firms in New York that the fund remains a weak point in state finances.

In picking a fight, the legislature would jeopardize the state’s long-term budgetary health.

Via Washington Post 

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