Passing off teacher pensions to local governments passes the buck but doesn’t solve anything

Maryland Senate President Thomas V. “Mike” Miller, Jr. advocates turning responsibility for funding teacher retirement costs over to local governments. The Benefit Sustainability Commission, chaired by former state House Speaker Caspar Taylor recommended transferring 50% of the cost of teachers’ pensions and social security to local Boards of Education – a $233 million cost shift. While this action would help the state’s financial situation “on paper,” in reality, it just throws the same problem to our counties and school systems.

The state has paid the cost of teacher retirement since the beginning of a pension system for teachers in the 1920’s. The amount now totals about $1 billion.

There are some sound policy reasons to consider local governments sharing in teacher retirement costs. The current 100% state funding for teacher pension benefits may help the state’s most affluent school systems afford the highest teacher salaries, to the detriment of less wealthy systems.

However, now is not the time to put additional burdens on local governments. School costs generally make up 40% to 60% of the expenses of Maryland counties. And local revenues are now in as serious trouble as the state government’s. 

Local governments rely heavily on property taxes. In a downturn, the property tax base takes longer before it declines than do the income and sales taxes – the mainstays of state revenues. As a result, the counties and Baltimore City governments are just now feeling the brunt of the revenue shortfall.

Merely shifting more cost from the state to the local level of government does nothing to relieve the problem. Already, the state has required local governments to pay for 90% of the cost of assessing property values for tax purposes and a share of the cost of educating children in state residential placements. Local governments are currently cutting services in public schools, community colleges, police and fire departments, recreation programs, trash removal, and their other services.

Making local officials add teacher retirement costs to their expenses will just shift the onus of solving the shortfall from state officials to local ones. The citizens pay taxes and depend on services from both state and local levels of government. Local governments will need to raise their taxes, cut more from school budgets, or cut more from other local services like police, road repair, and parks.

The Taylor Commission recommends phasing in the shift over Maryland ranks low among states in the share of public school dollars paid by the state. Maryland pays 42% of the overall cost of schools. The average state pays 48%. If Maryland decides to require local governments to share teacher retirement costs, then the state ought to increase its share of the direct costs of public schools. Maryland should not just offload its obligations onto its local governments, and worsen their financial problems.