August 7, 2013
THERE’S ALWAYS ROOM for clarification in this blog, especially when the clarifier was there at the Creation.
Below is an email I received from Bobby Neall, the former Anne Arundel County Executive, state Senator and state Delegate who knows more about fiscal and pension finances than just about anyone in Maryland. Here is his valiant effort (with stylistic editing on my part) to get the facts straight in my July 31 post on the history of Maryland’s pension problems:
“Am enjoying your columns immensely. Your most recent one on the pension system conflicts somewhat with my recollection, however.
“Warren Deschenaux [Director of the MD Department of Legislative Services] and I [then a state Senator] devised the so-called corridor methodology [for funding the state’s annual pension appropriation] as a means to prevent then Governor Glendening from diverting required pension contributions to discretionary spending.
” At the time [Glendening] was using the annual funded status of the systems — a mere snapshot — as the determining factor as to how much the [state’s] annual contribution should be.
“The rationale for the corridor [funding method] was as long as the funded status was between 90-110 percent, an amount equivalent to the [state’s] previous year’s contribution was sufficient.
“Given the legislature’s anemic budgetary powers, this was all we could do to prevent the governor from skipping payments altogether.
” So, while our solution was not without flaws, it prevented the hijacking of money properly intended for the pension system.
” It was meant to be a FLOOR.
“Somehow during the Ehrlich term, it became a CEILING, no doubt because of the tightness of money [in the governor’s budget].
“The situation, as I recall it, was made worse by [the decision of the governor and legislature to improve] pension benefits without [the state] making ample provisions for higher commitments to the system.
“So in summary, the choice we faced was either mandate a specific contribution or risk a Prince George’s County-style pension finance scheme [i.e., contribution holidays].
“Clearly, in the second Glendening term our action was warranted and necessary.”
[A further aside: Today, Neall is President of Priority Partners, the state’s largest Medicaid managed-care organization with over 225,000 members. My thanks to him for placing this matter in its proper context. An earlier editing change in the column for accuracy’s sake is due to the diligence of Major Morris Krome, a longtime trustee of the MD state retirement system.]