By Barry Rascovar, for MarylandReporter.com
It takes quite a bit for the quiet, diplomatic State Treasurer, Nancy Kopp, to criticize her fellow Democrat, Gov. Martin OMalley. But she gently laid it on the line in opposing OMalleys $100 million budget cut for state pension contributions.
Its a question of trust, Kopp said, as reported last week by MarylandReporter.com.
Bond rating agencies will look askance at OMalleys effort to permanently reduce by $100 million a year the states commitment to funding future pensions. It will be very difficult to defend when the agencies question her, she told legislators.
What Kopp didnt say, but others are filling in the blanks, is that OMalleys action is a cold, calculated slap in the face of state workers.
He is reneging on an agreement he made with them just a few years ago.The irony is that the very same working families OMalley defends so passionately are the ones hurt most by his callous action.
OMalley walks away
Working-class state employees and teachers were asked in 2011 to pay more into the pension fund and accept lower future benefits. Now they are watching the governor walk away from his part of the deal.
That will be dimly viewed by rating agencies, noted retirement fund executive director Dean Kenderdine. For good reason.
What he and Kopp dont know is how close Maryland could come to losing its coveted Triple-A bond rating because of OMalleys pension-funding duplicity.
The good news is that the General Assemblys budget panels arent likely to accept the governors high-handed action.
When cuts are made, its a near certainty lawmakers will see that OMalleys pension grab is countermanded and that the next governor will be required to commit an extra $300 million annually to close Marylands yawning pension-fund gap.
From the governors perspective, taking another $100 million from the states allocation to the retirement fund makes sense.
The move doesnt endanger anyones immediate retirement benefits. It helps OMalley avoid cuts in other programs. It shrinks the states long-term structural deficit. And it only delays by a year the retirement agencys target for reaching 80 percent of full funding.
OMalley also knows that calculating pension and retirement shortfalls is more an accounting shell game than a science.
Does the state really need on hand today 100 percent of the money required to pay off all future retiree benefits 192,000 of them decades from now?
The laws of probability are prohibitive that Maryland, or any other pension fund, will ever have to make a one-time, all-in payout.
Enough to pay current IOUs
Marylands $40 billion pension fund has more than enough money to write current retirement checks.
A 2011 law set out a gradual schedule for raising the states retirement accounts to 80 percent of full funding in a decade or so, and to reach 100 percent in two decades.
That was a sensible approach but not if OMalley and his gubernatorial successors override that law and continue to use the pension fund as a grab bag whenever theres a need for an extra $100 million or so elsewhere in state government.
Barry Rascovars other commentaries can be viewed at http://www.politicalmaryland.com