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Who's to blame for the pension shortfall?
Unions are not to blame for the severity of public pension shortfalls, but that doesn't mean that taking a hard look at collective bargaining is a bad idea. Matthew Di Carlo at Shanker Blog called yesterday for pols and commentators to stop blaming the nation's public pension issues on collective bargaining. He has a point, but I can't run with his conclusions here:
I find little evidence that the unionization of public employees has any effect ? whether positive or negative ? on the fiscal soundness of state pension plans. This, along with the fact that we already know why pensions are in trouble, and it has little to do with unions, once again represents strong tentative evidence that the push to eliminate collective bargaining is misguided, and the blame on unions is misplaced. States with little or no union presence are, on average, in no better shape.
Pensions are far from the only issue at hand. The Pew report cited by Matthew shows that, in addition to the $660 billion gap in pension systems, there is a $604 billion shortfall to pay for generous health benefits for public-sector retirees. This gap has little to do with the financial crisis, because states didn't have much savings to lose in the markets to begin with.
The absolute level of health care liability per person ? not the gap, but the dollar amount states will have
Who's to blame for the pension shortfall?
Maintenance of effort requirement too expensive for Montgomery County
Montgomery County, Maryland, one of the wealthiest and highest-performing large school districts in the country, is likely to reduce its level of per-pupil spending, in violation of a state maintenance of effort requirement. This means giving up an estimated $29 million in state aid in 2013:
The county's elected leaders have rescinded a request made last month seeking to be excused from a state formula for funding education.The decision would allow the county to reduce the amount of money it gives to Montgomery County Public Schools in the next fiscal year ? and potentially every year thereafter.
In a letter Thursday to the Maryland State Board of Education, County Council President Valerie Ervin (D-Dist. 5) of Silver Spring and County Executive Isiah Leggett (D) said they do not plan to seek a waiver from Maryland's maintenance-of-effort law.
The county spends roughly $15,000 per pupil, according to the Maryland Report Card, and found itself unable to cover the increased cost from enrollment gains in recent years.
The most interesting part of the story to me is the battle between the County Council, which sees an unsustainable budget, and the school board, which has been demanding that more county resources to be diverted to the already-flush schools. The Council seems to have tied the hands of the district with this move, committing Montgomery County to lower spending for the foreseeable future.
Maintenance of effort requirement too expensive for Montgomery County
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About the Editor
Chris Tessone
Bernard Lee Schwartz Policy Fellow
Chris Tessone was a Bernard Lee Schwartz Policy Fellow and the Director of Finance of the Thomas B. Fordham Institute. He has strong interests in governance and education finance, especially teacher compensation and school facilities finance.
