Dangerous Pension Cuts

The following commentary by MCEA President Doug Prouty was just run in Baltimore Sun.

Reducing teacher benefits, as a state commission proposes, would harm Maryland's top-ranked education system

By Doug Prouty

3:45 PM EST, January 12, 2011

Maryland educators have kept their promises to the students they serve every day. We've kept our promise to make Maryland's schools No. 1. We've kept our promise to work tirelessly every day to ensure that every child has the education he or she needs to succeed in the future. And we've kept the promise that we made in 2006 to more than double our pension contributions and improve our pension system from the worst in the nation to about average.

Unfortunately, the recommendations issued late last year by the Public Employees' and Retirees' Benefit Sustainability Commission and likely to be taken up during the General Assembly session that began this week would threaten the promise of a secure retirement for our educators, exceptional public services for our citizens and world-class public schools for our children.

As members of the commission acknowledged, this process was rushed. At the same time that the commission was voting on drastic, potentially devastating proposals to shift pension costs to the counties or reduce educator benefits, members of the commission decried the insufficient time they'd had to thoroughly study the proposals. With better actuarial data coming in the spring — and with the commission voting to extend its life until October 2011 — one cannot help but conclude that this process was hasty.

Unfortunately, the commission's recommendations would saddle hundreds of thousands of working families with the burden of fixing the underfunding of the state's pension system. The system was fully funded as recently as 2000, but it now has assets sufficient to cover just 65.4 percent of its obligations, and the funding gap is increasing every year.

Two major developments have been the main cause of this underfunding. One is a new method of determining appropriate state funding levels for the system, which was adopted by the legislature in 2000. Known as the "corridor method," it has allowed the state to short the pension fund each year since it was passed. The other is the stock market crash of 2008, which accounts for 85 percent of the funding shortfall, according to information presented to the commission.

What do these two causes have in common? Neither has anything to do with the salaries or benefit levels of those in the pension system.

The pension commission's recommendations call for an increase in our contributions or a reduction in our benefits. As it stands, the state pension system is modest by any measure and below the national average. Under the present system, teachers hired today would earn 54 percent of the average salary they earned in their final three years if they retired after 30 years in the classroom. Teachers who began working before the 1998-99 school year earn less than that. Nationally, teacher pensions are typically 60 percent after 30 years of service.

Following the commission's recommendations could send our system back to being the worst in the nation, which would present a major obstacle to Maryland's recruitment and retention of excellent educators. The commission also recommended shifting some of the costs of our pensions to the counties, which do not have adequate resources to take on these costs. Such a shift — in some counties, of tens of millions of dollars — would cripple the ability of each county to adequately fund its school system, to prevent ballooning class sizes, or to adequately provide other important public services. No consideration seems to have been given to the dire financial straits in which Maryland's counties find themselves.

While the state budget crisis is serious, Marylanders should demand a thoughtful process in solving it — one that will consider the long-term effects of any proposed changes. In recommending such dire changes, the commission is playing with the future of Maryland's schools and schoolchildren. With such high stakes, it hardly seems too much to ask for any recommended changes to be based on the best available data and for there to be sufficient time to fully consider their impact in the long and short term.

Thanks to the benefits, education funding and support that elected officials have provided — and the promises that they've kept — our public schools were ranked No. 1 in the nation for the third year in a row. As the 2011 General Assembly begins its work, we urge the governor and the legislature to reject permanent changes in reaction to temporary circumstances and to keep their promise to maintain a sustainable pension system and an excellent public education system. Together, we can find sensible ways to secure funding for our pensions without jeopardizing funding for our public schools and our other priorities.

Doug Prouty is president of the Montgomery County Education Association. His e-mail is dprouty@mcea.nea.org.