Thirty years ago, 23 percent of Maryland’s go-for-broke pension system was funded – meaning, it was 77 percent short of what was needed to meet obligations.
A major part of one political career – that of then-Del. Bobby Neall – was derailed. Many others were at risk, as angry union members threatened legislators with retribution at the polls. Then as now, promises were made to the workers – and broken. A bill to rationalize the imbalance between commitments and cash barely passed the two houses.
Hated by the teachers and other state employees, the new system worked. Over the next few years, the fund got healthier and healthier. Several times it reached 100 percent of what was needed.
Three years ago, the system was “reformed” once again. State officials promised to put aside enough money to meet obligations. But they almost immediately reneged on their promise, and Governor O’Malley is walking away from the deal yet again, to the tune of $100 million per year.
He’s going it alone. Peter Franchot, the comptroller, and Nancy Kopp, the state treasurer, oppose the governor. The pension grab, as worker advocates call it, will cost the taxpayer $1.7 billion over the proposed 20-year lifetime of the $100 million annual cut.
The cost will be high, because, unless replaced, the missing $100 million will not be in the investment portfolio, Kopp said. Franchot said Wall Street would not appreciate the broken commitment. The Street’s view matters. It sets the interest rates. The lower the rate, the less Maryland pays to borrow.
Franchot and Kopp declined to suggest budget cuts O’Malley might make to save the $100 million. Not their job, of course. And not an easy choice for legislative leaders.
Bears watching, especially in an election year. Teachers and state workers can be a potent force on the campaign trail – as 1984 showed dramatically.
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