Teacher Pension Plan Faces Hurdle on Costs

The Washington Post

Teacher Pension Plan Faces Hurdle on Costs
Md. Union Seeks $480 Million Boost

By John Wagner
Washington Post Staff Writer
Sunday, December 18, 2005; C06

Maryland's two leading Democratic candidates for governor stood in solidarity this fall with the state's largest teachers union, pledging their support in a battle to improve what educators say are the worst pensions in the nation.

But since then, Baltimore Mayor Martin O'Malley and Montgomery County Executive Douglas M. Duncan seem to be suffering sticker shock after learning that the initiative could cost $480 million annually.

"Is that something they want to do all in one year?" O'Malley asked in a recent interview.

Duncan reiterated his commitment to "major reform" in a separate interview but said he is not prepared to commit to a dollar figure. "We need to work with them on something that is affordable and makes improvements," he said.

Their views are emblematic of the challenge that teachers face in a fight that will unfold most immediately in the Maryland General Assembly session that begins next month.

"This is something our members deserve," said David Helfman, executive director of the Maryland State Teachers Association, which has launched a lobbying campaign that includes "house parties" to raise awareness across the state and an online pension calculator so teachers can see how they stand to benefit.

Maryland teachers who retire after 30 years receive pensions equivalent to about 38 percent of their pre-retirement pay, Helfman said. That compares with a national average of about 57 percent. But Maryland's problem is exacerbated by the proximity of Pennsylvania, which has one of the nation's most generous systems. The plan the union is pushing would raise Maryland's figure to 60 percent.

"We have a very poor teacher pension system, and it does affect our ability to retain and attract good teachers," said Del. Murray D. Levy (D-Charles), among the lawmakers who have studied the issue since last session. "We want to do something, but exactly where it falls between nothing and $480 million is going to depend on a lot of other things."

Of the $480 million, about $315 million would go toward improving teacher benefits. An additional $165 million would be used to boost the pensions of other state employees, including some education support staff. Lawmakers have made it clear that they are not likely to help teachers without assisting the rest of the state workforce.

Several other factors are likely to complicate the debate. Maryland teachers contribute 2 percent of their salary toward their pensions -- one of the lowest percentages in the nation. And they fare relatively well in pay: Their average annual salary of $52,331 ranked 12th in the nation last year, according to the National Education Association.

Under the teachers union's plan, educators' contributions could rise to 5 percent of salary. But state employee representatives have expressed concern that lower-paid workers could not afford that.

Lawmakers say a major factor contributing to the lofty price tag is the union's desire to apply more generous pension calculations retroactively. Applying the new formula only to future years served would significantly reduce the cost.

But Helfman said that would be unfair to "educators who have provided a career of service to the children of our state."

It remains unclear how much support, if any, the effort will receive from Gov. Robert L. Ehrlich Jr. (R), who faces reelection next year and has sparred with the teachers' union in the past.

"The governor is interested in retaining and attracting qualified teachers and is looking at the issue," his budget secretary, Cecilia Januszkiewicz, said last week. She said it is premature to say whether Ehrlich will include pension increases in the budget he plans to submit to the legislature next month.

State Sen. Edward J. Kasemeyer (D-Baltimore County), who is his chamber's point man on pensions, said he believes "a significant upgrade" is likely.

But Senate President Thomas V. Mike Miller Jr. (D-Calvert) sounded a more cautious note, saying it would be hard to fund the proposal in full without raising taxes -- which he ruled out -- or finding another new revenue source. Asked whether he was referring to the legalization of slot machine gambling, Miller chuckled.

"I'm not going to push it this year," he said. "If it happens, it happens."

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