Republicans want changes to program
ANNAPOLIS -- Top officials in Maryland's retirement system said Tuesday that the pension system's finances are improving, as Republicans introduced legislation to overhaul what they characterized as an unsustainable program.
R. Dean Kenderdine, executive director of the Maryland State Retirement and Pension System, told the Senate Budget and Tax Committee that investments had rebounded and were returning 7.1 percent in the first half of the fiscal year, after growing less than half a percent in the previous fiscal year.
Chief Investment Officer Melissa Moye said six of the state's eight major investments were performing stronger than expected.
"The system is moving strongly," said State Treasurer Nancy Kopp.
Still, that performance is below the 7.75 percent investment return that the Board of Trustees for the retirement system expects this year.
And Republicans, a minority in both legislative chambers, point out that the state owes current employees and retirees $58 billion, with only $37 billion of that on hand -- leaving nearly $21 billion unfunded.
Republicans want to require Maryland to fully fund pensions, stay away from risky investments, give new employees the option of a 401(k), give counties a voice on the pension board and make less optimistic estimates of how much pension investments will grow.
"Taxpayers, they take the risk if there's not enough money," said Del. Andrew Serafini, R-Washington County.
Serafini said the true pension debt is likely larger than $58 billion because the state overestimates how much its investments will grow. Maryland estimates a long-term return of 7.75 percent, but stock and bond markets have returned less than 6 percent over the past decade.
If the state reduced its estimated investment growth to 6 percent -- as one of the GOP bills proposes -- its debt to pensioners would grow to upward of $70 billion, he said.
Another proposal would require Maryland to fully fund its pension obligations every year, something Democrats have signaled support of. Under a funding system put in place in the early 2000s, the state wasn't required to fully fund pensions, depriving the system of $2.4 billion overall.