With two-thirds of its state employee pension/benefit system unfunded, Maryland's retirement system is in serious trouble. But according to a new study by the Maryland Public Policy Institute, the situation at the county level is even worse. On average, Maryland's 24 counties are funding only half of what's needed to provide promised post-employment pension, health and insurance benefits to their aging work forces.
The MPPI was the first to document unreported retirement liabilities at the county level, which are available in the form of an interactive map and spreadsheet at its Project Pension website. The figures, which describe each county's true financial condition, are taken directly from each county's own 2011 Comprehensive Annual Financial Report, which is required to conform to federal accounting standards. As the report authors note, they lay out "a fairly grim picture of insolvency."
In FY 2011, Montgomery County spent $284.3 million on pension/benefits for county employees. Prince George's County spent $320.7 million. But even that was a drop in the bucket compared with their unfunded liabilities: $4.5 billion for Montgomery County and $3.4 billion for Prince George's. These figures don't take into account the additional $20 billion in unfunded liabilities to cover more than 350,000 current state employees.
And the gap between promised benefits and the money available to pay for them will only get wider, since Gov. Martin O'Malley has already gobbled up the lowest-hanging fruit with recent tax hikes, prompting many high-income Marylanders to leave the state.
The governments of Montgomery and Prince George's counties are run by Democrats who have historically kowtowed to public employee unions, so don't expect major cuts in pensions or benefits, which Christopher Summers, president of the Maryland Public Policy Institute, describes as "more like Rolls-Royces than Cadillacs." Especially after a federal judge tossed out Baltimore's 2010 attempt to reform its police and fire retirement system last month. Instead, Summers believes county taxpayers are being set up for a "very big property tax battle" in the not-too-distant future.
To complicate matters further still, Maryland is not the only state in pension hot water. "I envision a bunch of Greyhound buses full of governors coming to Washington to demand a bailout of their pension systems like the auto industry got," Summers says.
But he warns that even with a federal bailout, without fundamental structural reform, "we'll be back in the same scenario 10 or 15 years from now." That's assuming Maryland and its counties don't go bankrupt first.