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Gov. Martin O’Malley discussed plans Tuesday with legislative leaders and local officials to shift teacher pension costs to Maryland counties and reduce tax exemptions for high-end earners, according to participants in the meetings.
Maryland currently is one of the few states in the nation that picks up the entire teacher pension cost, which is projected to be about $900 million in the next fiscal year.
O’Malley, a Democrat, is talking about specifying in state budget legislation that counties would split the cost with the state.
In return, the state would share half of the $450 million in Social Security costs currently paid entirely by counties. Overall, the state would save about $225 million.
“I think it was a balanced proposal by the governor — some revenue enhancements, as well as a discussion about shared responsibility and liability for teachers’ pensions that we’ve talked about in the past,” House Speaker Michael Busch, D-Anne Arundel, said after the meeting.
Local officials, however, were not happy when they emerged from a meeting with the governor late Tuesday afternoon. Unlike past years when proposals called for gradually shifting the burden over three or four years, the shift would happen all at once, local officials said.
“It’s a difficult pill to swallow, and I’m not swallowing it,” said Montgomery County Executive Isiah Leggett, a Democrat, describing proposals to mitigate the shift as not going far enough to offset the new expense, which will be hard to absorb.
Howard County Executive Ken Ullman said he appreciated the governor’s efforts to explore ways of softening the blow, but it’s still a tough proposal for counties.
“I still don’t think it should be shifted,” Ullman, a Democrat, said. “I know my colleagues don’t think it should be shifted. It’s a huge burden, but I do respect and appreciate the governor’s attempt to make it more palatable.”
In an interview before specifics of the governor’s plan began to emerge, Del. Andrew A. Serafini, a Republican and chairman of the Washington County delegation, said Tuesday that a shift in the financial burden of pensions to the counties could be “devastating,” in light of other obligations they face for school and highway funding.
Serafini said he was “pretty confident” the shift wouldn’t be proposed this year, but he isn’t surprised that a variety of tax and funding changes are on the table.
Wayne Ridenour, president of the Washington County Board of Education, said Tuesday afternoon that he had heard the governor was going to make a recommendation, but had not seen the proposal.
“We haven’t gotten anything,” he said. “So I really can’t say anything.”
Richard Wright, a spokesman for Washington County Public Schools, said in an interview at a school board meeting Tuesday night that he did not know how much county teacher pensions cost.
He said the county school system pays about $1.5 million into pensions for nonteaching employees like custodians and bus drivers. The school system also pays the state an administrative fee of about $360,000 for pension programs, Wright said.
About 1,800 teachers in the county are in the state pension plan, he said.
The idea of sharing teacher-pension costs has been bubbling for years, as the state has faced budget constraints from the recession and its aftermath. The teacher pension cost also has risen rapidly in recent years.
Maryland is facing a $1.1 billion budget deficit, and lawmakers have called on O’Malley to take steps to reduce half of the state’s ongoing deficit this year. The governor is scheduled to make his budget proposal public today.
Busch also said the O’Malley administration talked about doubling the state’s “flush tax,” currently a $30 annual charge on sewer bills to upgrade wastewater treatment facilities to reduce pollution in the Chesapeake Bay.
O’Malley aides were not talkative with reporters after the meeting.
“The governor will announce the budget tomorrow,” Rick Abbruzzese, O’Malley’s director of public affairs, said.
During the meeting, the speaker said O’Malley did not mention the idea of reviving a tax on people who earn $1 million a year, which was instituted in 2008 and expired in 2010. O’Malley instead talked about proposals to reduce certain tax exemptions for high-end earners.
“I think you’re looking for a possibility of over $100 million in some of the issues we’re talking about in exemption reductions,” Busch, who did not specify what exemptions are under consideration, said.
That would help counties offset some of the expense of sharing some teacher pension costs.
“The counties would get some of the money from the exemptions if they were reduced,” Busch said. “They would be a windfall to the counties as well, not a huge windfall, but there would be money that would go back to the counties.”
Senate President Thomas V. Mike Miller, D-Calvert, described the governor’s plan to shift teacher pension costs as a compromise, after O’Malley proposed more than $370 million to help counties with school construction. That’s the second-highest amount ever set aside by the state.
“It’s a compromise, and compromise is not a dirty word in politics,” Miller said. “You know, the governor gives some to the counties, he takes some away. He makes the counties happy; he makes them sad. Not everybody can be happy in these very difficult times.”
Busch said there was no discussion about a gas tax increase during Tuesday’s meeting with the administration. That could come later in legislation separate from the budget.
“Stay tuned,” said Raquel Guillory, an O’Malley spokeswoman, who noted that gas tax details would not be included in the governor’s public presentation of the budget today.
Miller, who has long advocated for shifting some teacher costs to the counties, said the amount the governor is proposing is not as much as he would like to see. Still, Miller described it as important progress illustrating leadership by the governor.
Staff writers Andrew Schotz, Julie E. Greene and Dave McMillion contributed to this story.