Baltimore County Biggest Teacher Pension Loser

Baltimore County would be the biggest loser when it comes to the shifting of teacher pension costs to the state's 24 local jurisdictions under a budget proposal introduced today by Gov. Martin O'Malley.

O'Malley's proposed fiscal year 2013 budget includes shifting  $240 million in teacher pension costs to local governments. After accounting for more than $244 million in so-called offsets that O'Malley said would soften the blow, Baltimore County would still have to cover about $1.8 million in costs as a result, according to a Maryland Department of Budget and Management document released at the request of Patch.

County Executive Kevin Kamenetz, in an interview with WBAL radio, pegged the "hard costs" to Baltimore County at as much as $10 million annually.

O'Malley called it one of the most controversial parts of his budget proposal.

"For about six years we've been having this conversation," said O'Malley, adding that Maryland is "probably the only" state to cover 100 percent of teacher pension costs.

"I have become convinced that some better sharing of that responsibility is in order, mostly because the counties are much closer to the negotiating table than the state is," said O'Malley. "Another way of expressing that is, as contracts are negotiated, if you're not covering most of the costs of pension benefits, you're not motivated to keep them within the meets and bounds and parameters of fiscal responsibility. In fact, one might even be tempted to save on salary concessions at the expense of loading up what is put on the state tab in terms of pension concessions."

Local governments cover the Social Security costs of the teachers, said O'Malley.

Net Impact of Proposed Teacher Pension shift. Source: Maryland Department of Budget and Management (Amounts are rounded and may not add up.)

Jurisdiction 50/50 Pension Split offset Disparity Grant Final Cost Anne Arundel County $17.7 million $18.1 million 0 $447,728 Baltimore City $15.9 million $8.9 million $7 milion 0 Baltimore County $23.8 million $21 million 0 -$2.9 million Carroll County $6.3 million $5.5 million 0 -$733,251 Harford County $8.4 million $7.1 million 0 -$1.3 million Howard County $16.2 million $16 million 0 -$292,098 Prince George's County $27.4 million $19.8 million $7.6 million 0 Montgomery County $41.2 million $59.3 million 0 $18.1 million

The $244 million in so-called offsets for the counties could come from a variety of sources including:

• $111 million in deduction and exemption reductions for so-called "higher earners."
• $40 million from closing a loophole that allows companies to create business relationships solely for the purpose of avoiding paying taxes on real estate transactions.
• $367 million over 10 years by repealing a requirement that counties repay money taken from a state accounting reserve.
• $19.5 million in adjustments to the state disparity grants.
• $37 million from ending a requirement that local governments reimburse teacher retirement costs from federally-funded positions.

The initial hit before any offsets by the state appears to be lower than expected. One official told Patch Tuesday that the expectation was the shift could cost the county as much as $50 million annually.

The county has opposed proposals to shift teacher pension costs in the past. A spokeswoman for Kevin Kamenetz said the county executive had little to say this year.

"Our budget analysts are reviewing the proposal," said Ellen Kobler, adding that this would be the sum total of the county's statement on the issue Wednesday.

Kamenetz told Robert Lang, a WBAL radio reporter, how much of a hit the county actually takes is dependent upon whether the General Assembly passes other tax programs in the budget.

"It's really a $50 million bill," Kamenetz told Lang. "Boy, that's a lot of money and we really have no say in it."

Meanwhile, leaders of other counties are publicly opposing the shift in costs.

Montgomery County Executive Ike Leggett, a Democrat, emerged from a Tuesday afternoon meeting with O'Malley and other county leaders from around the state and proclaimed the proposal "a non-starter."

"The bottom line is that it's not an acceptable approach," said Leggett. He added that the mechanisms to soften the blow are inefficient, and that the change would be immediate.

"It's a difficult pill to swallow," he said.

Howard County Executive Ken Ulman, also a Democrat, said after Tuesday's meeting that he also opposes the shift because counties are "not in any better position to afford it than the state is."

"We're going to work hard to educate legislators on why we think the teacher pension shift is not the right move," Ulman said.

In an interview earlier on Tuesday, Anne Arundel County Executive John R. Leopold, a Republican, said he will not support the pension shift, adding that it would entirely wipe out the $50 million in spending reductions he has made in his five-year tenure.

Shifting a portion of teacher pension costs to local governments isn't the only proposal in O'Malley's proposed nearly $35.9 billion budget.

The governor's proposed budget also seeks to close a nearly $1 billion structural deficit by increasing taxes on what O'Malley referred to as the state's highest earners.

The plan would institute a 90 percent cap on deductions for those earning above $100,000 and an 80 percent cap for those earning more than $200,000.

The plan would cut exemptions from $2,400 to $1,200 for singles making between $100,000 to $125,000 and couples earning between $150,000 and $175,000.

Exemptions would be eliminated for singles and couples earning more than $125,000 and $175,000 respectively.

O'Malley said a family of four earning more than $150,000 would expect to pay an average of $191 more each year.

He said the change would affect two of every 10 state residents.

The proposal also includes:

• Nearly $20 million in tobacco taxes placed on items such as cigars and chewing tobacco.
• $21 million in sales taxes from online sales.
• $20 million from closing tax loopholes on coal mined in the state,  telecommunications companies, coins and bullion, and other miscellaneous items.
• $9 million from level funding commissions to lottery agents.
• $2 million from online lottery sales.
• $59 million in settlements with pharmaceutical and insurance companies.

O'Malley is also asking for an increase to the so-called flush tax that currently stands at $2.50 per month. The increase would be pegged to the amount of water used.

Residents on well and septic could see an increase from $2.50 per month to $5.

There would also be fee increases on death certificates, under O'Malley's proposal.

In addition to the increases and a transfer of a more than $100 million in special funds, O'Malley said his budget proposal contains $610 million in cuts to other general fund programs.

One increase not discussed was a possible increase in the gas tax.

"These are the questions we will save for another day," said O'Malley, when asked about the tax that would go to the Highway Users Trust Fund and pay for road repair projects.

O'Malley's current proposal would send 81 percent of the nearly $163 million in available highway user revenue money to Baltimore City.

By comparison, Baltimore County would receive about $3.7 million or slightly more than 2 percent of the available money.

The governor stressed that a key focus of his budget was jobs. He said his budget contained about $4 billion—most in the captial budget program—for jobs. Many of them related to school construction and renovation projects around the state.

Included in the governor's capital budget proposal are projects in Baltimore County including:

• $33.2 million for a new performing arts and humanities building at the University of Maryland, Baltimore County.
• $22.9 million for construction and renovation projects including the Dundalk High/Sollers Point Technical School; Parkville and Lansdowne High Schools; Milford Mill Academy; Parkville Middle School; and Grange, Hawthorne, Jacksonville and Stoneleigh Elementary schools.
• $21.9 million for alterations and additions to the Dundalk Readiness Center
• More than $19.5 million for Towson University for campus-wide safety and circulation improvements and addition and renovation of Smith Hall.

Capital News Service reporters Mike Bock and Lizzy McLellan contributed to this story.