In announcing a proposal to shift some teacher pension costs to local counties this past week, Maryland Gov. Martin O’Malley said local jurisdictions haven’t had enough incentive to control salaries because the state has borne the cost of teacher pensions.
If a pension pushdown does happen, some Washington County Board of Education members said it could affect salary issues in contract negotiations.
Other board members said it was too soon to say what impact a possible pension cost pushdown would have or they didn’t want to speculate because the school system is in negotiations with the teachers union on salary issues.
“It could impact dollars and cents-wise the amount you would be able to offer in salary increases, plain and simple,” said school board member Paul Bailey, who chairs the board’s Human Resources Committee.
Health insurance costs are going to continue to go up, too, Bailey said.
“That’s going to take another large divot out of any budget,” Bailey said.
O’Malley’s pension proposal, which includes having the state pick up some Social Security costs that local jurisdictions have borne, has a net effect of Washington County losing $2.46 million in the upcoming budget year. Locally, at least an estimated 2,300 of the pension participants are Washington County Public Schools employees, with about 200 from Hagerstown Community College and several from Washington County Free Library.
Denise Fry, president of the Washington County Teachers Association, said she could not accurately say how the proposed pension shift would affect negotiations until she “sees where this lands,” but the issue’s impact on current and future contract negotiations is “very real.”
If the legislature approves the pension proposal as is, it “will challenge everyone to look differently at how we move forward,” Fry said.
Now that O’Malley has released his proposed budget, legislative committees will review it and offer amendments.
While local jurisdictions negotiate salaries for teachers, the state has paid the governmental share of those pension costs. Employees also contribute to the pension plan.
The state’s costs for the teachers’ pension plan have more than doubled in the past five years, from $431 million in 2006 to $900 million in 2011, according to a slide show presentation of the governor’s budget proposals.
Teacher retirement costs are driven by the benefit design and employee cost-sharing arrangement, investment performance and growth in teacher salaries, according to the presentation.
Starting July 1, 2011, the state changed the formula for pension payouts to include the average salary a participant earned during the last five years of service rather than the last three years, said Michael Golden, spokesman for the Maryland State Retirement and Pension System. That change was an effort to bring down pension costs, he said.
Last fiscal year, the state’s pension costs for Washington County school system employees was $18.6 million, school system spokesman Richard Wright said. The school system paid $12 million in Social Security and Medicare taxes for its employees last fiscal year, Wright said.
Separately, the school system spent about $1.6 million last fiscal year for pensions for noninstructional personnel such as custodians and bus drivers, Wright said. The state did not contribute to those employees’ pensions, he said.
While there still are many unknowns regarding how the final state budget will turn out, school board Vice President Jacqueline Fischer said the pension proposal could affect contract negotiations if the school system ends up getting less funding overall from the state than it did for this fiscal year.
If the pension pushdown happens in the long run, it will have to be considered when the school system is negotiating pay raises, Fischer said.