State pension shortfall looms large for Maryland

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By Tom LoBianco

Maryland’s pension funding situation is one of the worst in the nation, a panel of financial experts said Tuesday.

The state has chronically shortchanged its pension system since 2002, and payments to another pension system -- so-called Other Post-Employment Benefits (OPEBs) – have been almost non-existent.

The panel was convened as lawmakers prepare to pass a $32 billion budget, strapped together with massive spending cuts and one-time fund transfers designed to account for a $2.5 billion shortfall.

Lawmakers are staring down an estimated $8.5 billion spending shortfall over the next four years, or more than $2 billion a year.

The combined cost to fully meet state pension and OPEB benefits amounts to about $26 billion over the next 30 years, or slightly less than $1 billion a year on top of the existing shortfalls, according to a Pew Center for the States study.

While that pension number may seem insurmountable, small changes and investments now can easily put the state on stable footing, said financial experts who convened Tuesday at The Maryland Inn.

“Get a handle on it now, before it becomes unmanageable,” said Kil Huh, research director of the Pew Center for the States.

The Pew Center ranks Maryland at the bottom of the pack when it comes to funding pensions, along with 18 other states. The center also says the state “needs improvement” when it comes to paying for OPEBs, although 39 other states share that label.

“This puts us in a tier with states known for serious fiscal problems like Illinois and New Jersey,” said Gabriel Michael, a fellow at the Maryland Public Policy Institute, which sponsored the event.

Still the problems will be addressed in due time, said the head of the state’s retirement system.

“We’re not going to go out of business, we’re not going to merge with the state of Pennsylvania,” said R. Dean Kenderdine, executive director of the Maryland State Retirement Agency.

Pension reform on the smaller scale – following the plea deal which resulted in former Baltimore Mayor Sheila Dixon keeping her city pension despite a de facto admission of guilt – has received plenty of attention during this year’s session.

But the macro troubles have received little attention in an election year where politicians have powerful labor unions to assuage and massive fiscal overhaul is likely to shake loose further discontent.

“It clearly is something that is going to receive a lot of attention in the next General Assembly session,” Kenderdine said.

Click here to read the full report from the Pew Center.

Read more articles and political observations from Tom LoBianco here.
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