O'Malley fights the good fight on Maryland pensions

Maryland is not a hot-bed of education reform (though the
newly-formed MarylandCAN no doubt hopes to change that) and Martin O'Malley is
not usually seen as vying for the crown of public-sector reformer as Chris
Christie, Andrew Cuomo, et al. are. Nevertheless, O'Malley is stepping out in
favor of a much-needed—and relatively unpopular—reform
to Maryland's teacher pension system.

Under current law, the state shoulders most of the burden
for teacher pensions, not districts. It's a sweet deal for the state's
wealthier school districts, which can max out teacher salaries without bearing
much in the way of pension costs. The state, in turn, must divert resources
from other uses to pay the bill for retirement benefits.

The state will only pick up half
the tab, leaving local school boards with significant skin in the game.

O'Malley's plan is modest. The state will only pick up half
the tab, leaving local school boards with significant skin in the game. In
return, the state will pay half of the employer contribution to Social
Security, an expense that is capped by statute and, unlike pension costs, is not
subject to investment losses. Nevertheless, many county officials, especially
in wealthy counties, predict fiscal
will result.

The governor and his allies in the legislature on this issue
need to make the case for getting this bad arrangement off the books in
Maryland. (A similar law is in effect in Connecticut—Nutmeg State chief exec
Dannel P. Malloy could borrow a page from O'Malley's playbook.) Given
Maryland's $11 billion pension shortfall and enormous underfunded liabilities
for retiree healthcare, it wouldn't hurt to go even further, considering
reforms along the lines of Rhode Island and Utah's move toward hybrid
retirement systems. But every little bit helps to close the state's structural
budget deficit of $1.1 billion
and make the allocation of education aid to
local governments smarter.

Chris Tessone
Chris Tessone is a Director of Finance and Operations; at the Thomas B. Fordham Institute