MD Pension Fund Mystery Unearthed ! !

August 14, 2013

ONWARD WITH historical clarifications — and a new puzzle connected to Maryland’s pension fund mess and how the state stepped in such deep doo-doo.

First, in response to former state Sen. Bobby Neall’s corrective comments on the true birth-fathers of the now-discredited “corridor funding method,” for state pensions, Maryland State Treasurer Nancy Kopp has chimed in.

She emailed her staff and the pension board that Neall’s version as recounted in www.politicalmaryland.com  is “a very fair and accurate description of the origins” of this unorthodox approach that is now being phased out over 10 years.

SRPS_LogoKopp diplomatically describes it as “the legislature’s prudent attempt to constrain [Gov. Parris Glendening’s intentional] underfunding” of the retirement system. (In truth, it was a raid on the pension fund.) She also notes “the Board of Trustees opposed it from the beginning.”

Kopp explains that “regardless of the legislators’ intention, the corridor-based funding level was always subsequently treated in the budget as the required amount, rather than as a floor.” That short-sighted move helped Glendening pay for new social programs and enhance his reputation, but it created massive pension funding gaps that will take a decade to eliminate.

Neall’s “strong voice and incisive leadership” on pension matters might have prevented this terrible misjudgment, Kopp writes, but by then he had left the state Senate. He was “sorely missed” — an understatement if ever there was one.

And Now. . . . The Mystery

Skip forward a few years and the second pension blunder takes place.

Republican Gov. Bob Ehrlich is facing a Hobson’s choice — sign an expensive pension enhancement bill sponsored by the state teachers union (passed unanimously by both houses) — or risk antagonizing that influential union when he runs for reelection in the fall.

Cecilia Januszkiewicz, the governor’s capable budget secretary in 2006, sent me this email in an attempt to elucidate:

“Saw your pension article. Just for the record, the 2006 pension enhancement was introduced by Mary Dulany James in her capacity as Chairman of the Joint Committee on Pensions. It was not an Ehrlich Administration initiative. It passed both [h]ouses unanimously. It became law without the Governor’s signature. You can look it up.”

Sure enough, the ever-alert Department of Legislative Services reports that the governor did not sign the pension bill Januszkiewicz refers to. Yet all news organizations (The Sun, the Post, the Daily Record, the Gazette, Associated Press) report that Ehrlich signed the pension enrichment bill that day.

Even more baffling, Ehrlich, Lt. Gov. Michael Steele and the governor’s press office went to great lengths to praise his signing of the enrichment bill.

What’s going on?

. . . . The Rest of the Story

Here’s the way it happened: The pension enhancement bill, not sponsored by the administration, passed unanimously in both chambers, as Januszkiewicz wrote.

But so did a second pension bill — this one made minor changes to pension practices, simplified language and corrected grammatical errors. The bill had “no fiscal effect.”

It is the second, revenue-neutral pension bill, HB1430, that Ehrlich refused to sign or veto. Why remains shrouded in the mist of time.

The Republican governor did, though, sign HB1737, the expensive pension enhancement bill (total price tag to the state and counties: $2.1 billion). He vetoed the Senate version because it was duplicative.

End of this mini-mystery. It was a mix-up anyone could make. Case closed. Unless, of course, readers of this blog unearth some new pension twist buried deep in the recesses of Maryland’s state archives.

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puzzle in this pension