Insert photo caption or credit here
by George Liebmann
The combined actuarial pension deficits of the State and Baltimore City, Montgomery
County, Howard County, and Prince George’s County amount to
about $13 billion. The state health benefits deficit and the combined local health
benefits deficits are each around $15 billion. Recent estimates of the state’s health
deficit by Credit Suisse and the Cato Institute are $5 billion to $7 billion higher
than the state’s estimate of $15 billion. Amortization of these combined deficits of
more than $45 billion could require annual sums equal to 12 percent of the
present state budget, more than twice Maryland’s total state public safety expenditures.
The need for alteration at least for new employees of the retirement health
programs and the need for converting the defined benefit pension programs into
defined contribution programs is manifest. The consequences of such changes are
benign: de-emphasis of fringe benefits in favor of salaried compensation will provide
a less immobile state work force, with fewer "time servers" and more opportunities
for new entrants.
At the least, both state and local governments must adopt credible formulas for
funding both health and pension deficits and must adhere to them. Failure to confront
such problems potentially induces not merely inflation, but hyper-inflation.
Some European and Latin American countries have seen democracy swamped by
the political consequences of inflation unleashed by improvident and unredeemed
promises by the state. The way Maryland’s elected state and local officials deal
with these issues is a sure litmus test of their political morality as individuals. Hit
and run politics will not suffice.