… Leopold says existing system is ‘crying out for reform’ …
By Nicole Fuller, The Baltimore Sun
5:43 PM EST, November 28, 2010
Anne Arundel County Executive John R. Leopold has set his sights on an overhaul of the county’s pension and retiree health care benefits in his second term.
While the county’s pension system is relatively healthy, Leopold said the current system rewards county employees with generous benefits not seen in the private sector, adding that both pension and retiree health care benefits are “crying out for reform.”
Leopold said he plans to establish a work group to come up with solutions. But he said he prefers a pension system for new employees that operates similar to a 401(k), moving from a defined benefit to defined contribution program and requiring employees to contribute more to the fund. Any change to the pension system would be done through union negotiations, while changes to the health care benefits for retired employees would need County Council approval. Leopold said he’d like the advisory group to issue recommendations within 6 months, with the goal of reforms in a year.
“We will broach both issues, whether legislatively or through negotiations,” said Leopold, a Republican who was re-elected this month. “It will require a collaborative approach with the unions and everybody recognizing the austere fiscal realities we all face.”
County Councilman Jamie Benoit, a Democrat who also won re-election, campaigned on the issue of fixing the county’s retiree health care benefits and plans to address it after the council reconvenes next month.
Cpl. O’Brien Atkinson, president of Anne Arundel’s Fraternal Order of Police, said the union agreed last year — after going to arbitration with the county — to increase the amount of employee contribution to the pension fund by 2.25 percent.
“I think they need to be very cautious attacking pension benefits for new hires, because currently we have trouble hiring new recruits in Anne Arundel County,” said Atkinson. “Our benefits are constantly under attack.”
The county paid out about $50 million in the past fiscal year from the $1.2 billion pension fund, which is about 85 percent funded – county officials said it’s a relatively high funding level for a municipal fund. For example, the state pension fund has 65 percent of the money that it calculates is needed to meet future obligations.
At the state level, some members of the legislature have said the state should begin shifting teacher pension expenses, which cost the state about $900 million this year, to local governments — which would place a further strain on county government resources.
Leopold, who served in the General Assembly for 20 years before becoming county executive, said he understands why legislators might seek the change because “counties that set larger salaries are being subsidized by counties with smaller salaries.”
“Hopefully if they do it, it’s done over a period of years, so the hit to the county wouldn’t be that serious [as if] if they did it in one or two years,” said Leopold, who said he preferred no change “at all.”
Leopold said estimates show the change could cost the county $16 million in the first year, with offsets from federal funding, and up to $30 million in the second year. He said the county has already experienced significant cuts to state aid. Two years ago, the county received $25 million in highway user revenues from the state’s Transportation Trust Fund. This year, the county got $800,000.
John Hammond, the county budget officer, said because of federal rules any changes to the pension fund will only affect new employees. And while the county’s pension fund is “in very good shape,” Hammond said it’s a “big expense.”
For example, Hammond said, a county police officer or firefighter can retire after 20 years and draw an annual pension of 50 percent of salary. The maximum benefit rises to 70 percent of a worker’s annual salary after 30 years of service. Other county employees earn 60 percent of their salary after 30 years.
While police and firefighters contribute 7.25 percent annually to the pension fund, other county employees contribute 4 percent. The county contributes about 30 percent. Anne Arundel typically funds 80 percent of retired employees’ health care benefits.
“People are concerned about the growing costs of benefits,” Hammond said. “The conversations that you’re hearing these days … you have these generous employee benefits and jurisdictions need to get a handle on these costs.”
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