Here at MPPI, we’ve written a lot about pensions. We even have a pension map to give the public more information about the issue. Recent news indicates that our state’s pension problems, bad in the past, aren’t getting any better.
A story from the Maryland Reporter notes that for Fiscal Year 2011, Maryland’s pension fund earned 20% on its investments, but this performance is nothing to celebrate. As the article says, “the Maryland system did not perform as well as most large pension systems around the country, showing earnings worse than four out of five of them, according to a report from the Department of Legislative Services.”
Our state’s pension fund is growing, but it needs to grow faster in order to have enough resources to fund the pension plans promised to state workers.
Why does the pension fund need to grow significantly? It’s because government workers are able to receive some pretty lavish retirement payouts. As the Sun recently reported:
Several top police officers in Baltimore County retired this year with lump-sum payments of more than $500,000 under a program started seven years ago for public safety veterans…. One police major, who retired June 1, left with a DROP payment of nearly $520,000, plus more than $101,000 for unused vacation and comp time. The major’s yearly pension will be more than $158,000. Another seven police retirees got DROP payments of more than $400,000.
Yes, these were county, not state, workers, but the issue remains the same: government workers are eligible for generous pensions that the state does not currently have the resources to pay for.
Last year, Marta Mossburg wrote a blog post that included a link to a fact sheet from the Pew Foundation on Maryland’s pension problems and retiree benefit problems. While our pension issues aren’t great, the retiree benefits problems are abysmal: “Maryland has a $14.8 billion bill coming due for retiree health care and other benefits. The state is one of 29 with any assets set aside to cover this long-term cost, but only $118.9 million—less than 1 percent of the total—has been funded.”
To his credit, Governor O’Malley did propose a reasonable pension plan earlier this year to deal with this issue. The General Assembly, under pressure from government worker unions, weakened the plan. State policymakers need to get serious about addressing pension issues now, before they become a critical issue.