Mayor Rawlings-Blake to Introduce Civilian Pension Reform Legislation
Monday Apr 29th, 2013
Better Schools. Safer Streets. Stronger Neighborhoods.
FOR IMMEDIATE RELEASE
BALTIMORE, MD. (APRIL 29, 2013) – Today, Mayor Stephanie Rawlings-Blake will introduce civilian pension reform legislation to the City Council as part of the City’s first Ten-Year Financial Plan to eliminate a $750 million cumulative budget shortfall, invest in infrastructure, and reduce homeowner property taxes by more than 20%. Mayor Rawlings-Blake’s financial plan seeks to rebalance City employee compensation, with better wages up-front and competitive benefits that the City can afford. The reform effort includes increasing employee pension contributions over a five year period to 5% while raising civilian employee wages by 10% over the same five year period. Currently, Baltimore’s pension system for civilian workers is the only large system in Maryland that doesn’t require any employee contribution. The legislation also calls for eliminating a “variable benefit” for civilian retirees, which siphons dollars out of the pension trust when the stock market is up, but makes no adjustment when the market declines. City pension costs have nearly doubled since FY2004, and without reform, costs are projected to grow by another 40% by FY2022. Reforms to the civilian pension plan for current employees are expected to save $53 million over nine years. “This plan includes a bold set of major reforms to fundamentally change the way the City does business. The costs of outdated benefits have crippled our ability to pay workers what they truly deserve in their paychecks,” Mayor Rawlings-Blake said. “We must make tough choices to rebalance the way we compensate our hard-working employees by reforming unsustainable benefits and instead invest in better wages up-front. As a community, we must reject the status quo and embrace a call for bold action. We must change to grow.” In the coming weeks and months, Mayor Rawlings-Blake will introduce additional legislation to create a defined contribution 401(k)-style retirement plan for all new civilian hires and create a “hybrid” defined contribution/defined benefit plan for all new public safety hires. Mayor Rawlings-Blake said if all the proposed Ten-Year Financial Plan reforms are enacted, the City’s improved fiscal foundation would help achieve the Mayor’s goal to grow Baltimore by 10,000 families by:
- Eliminating a $750 Million structural budget deficit—protecting basic City services—including public safety and public education — from future cuts.
- Allowing new, major investments in neighborhood infrastructure—including repairing roads and city facilities, and rebuilding ten recreation centers—and providing a funding surge for demolition of more than 4,000 vacant homes.
- Reducing homeowner property taxes by more than 20% over the next ten years.
Today, the Rawlings-Blake administration also introduced legislation to safeguard the city’s finances in the event that the U.S. Court of Appeals for the Fourth Circuit upholds a ruling of the U.S. District Court of Maryland regarding Fire & Police Pension reforms enacted in 2010. While nearly all of the of the money-saving reforms were ruled constitutional by the lower court, one provision related to post retirement cost-of-living-adjustment (COLA) increases was struck down. At Mayor Rawlings-Blake’s direction, the Law Department drafted cost-neutral, “curative” legislation while the City appeals the ruling in the Fourth Circuit. The legislation creates a flat post-retirement COLA of 1.3%, rather than a “tiered” system based on the age of the retiree. If approved by the City Council, the legislation would only be enacted if the City’s appeal is unsuccessful. A Ten-Year Fiscal Forecast conducted by independent financial experts called the Fire & Police Pension litigation “the single largest, most immediate threat to the City's fiscal stability.” The report continued, “If the City's approach is not fully upheld, the City's recent fiscal progress would be set back dramatically to the severe detriment of the public interest and welfare, and the health and sustainability of the FPERS retirement system would also be severely eroded.”