While healthcare reform is going to be a major issue in elections this year, there is another issue that may be just as powerful if not more so-particularly at the local level. The healthcare debate will impact U.S. Congressional races across the country, and there may be some trickle down the ballot to state and local elections.
Much more potentially damaging to incumbents is the issue of pension reform. I attended a town hall meeting last night in Towson sponsored by Americans for Prosperity. The subject was pension reform. This is an issue that could prove disastrous to incumbents, if they choose to ignore it.
Most of the town hall focused on Baltimore County, but the speakers noted that this is not a situation isolated to the County. The issue of elected officials' pension hit widespread consciousness with two recent incidents.
First, convicted and disgraced former Mayor Sheila Dixon, as part of her plea deal was allowed to keep her $83,000 a year pension, despite being found guilty by a jury of her peers of stealing while in office. Second, Baltimore County Councilman Vincent Gardina announced that he would not seek re-election in 2010. At that time, it was published that he would begin receiving a pension at age 55, $54,000 a year for the rest of his life.
Some points about the Baltimore County Council and Executive pensions:
1. County Council is a part-time position, requiring an average of 1,000 hours per year, some members will work more and some will work less. By contrast, someone who works forty (40) hours per week with two weeks vacation will have worked 2,000 hours per year.
2. County Council salary was $38,500 in 1998, and now it is $54,000, a forty percent (40%) increase twelve (12) years later. Then, if you are elected by the rest of the Council to serve as Council President for a year, you receive an extra $6,000 for that year ($60,000 total for the year). Gardina has been quoted as saying that $54,000 is not enough for this part-time job.
3. For each term you serve on the Council, you receive twenty percent (20%) of your salary. Vince Gardina will have served five terms when he retires, which is why he will collect his full current salary for the rest of his life.
The County Executive, who makes $150,000 per year, receives 20% for each term, with the legal limit of being able to serve only two terms. So, County Executive Jim Smith, will get a pension of $60,000 a year after his second term ends this year. This does not include the pension that Smith will receive from his time on the County Council, or his fifteen (15) years as a Circuit Court judge. One of the speakers last night said that Smith will collect approximately $150,000 a year for the rest of his life-all at taxpayer expense.
These pensions are known as defined benefit plans. Most of these pensions are being discontinued or phased out in the private sector. One main reason is financial; companies cannot afford to provide pensions to their employees.
One other reason is a federal law known as ERISA. This law required pension plans to be appropriately funded, and of course, the law exempted governments from following this law. The advantage to government of this exemption is that they do not have to raise taxes from the public to fund adequately the pension promises they are making. If they did, then it would be unlikely that they could get public approval for what they are doing for themselves.
Steve Bailey, AFP Co-Chair for Baltimore County with Joe Seehusen, relayed that Councilman Kevin Kamenetz called him to ask him to stop talking about pension reform. Kamenetz is expected to run for County Executive in 2010.
Pension reform is a subject that no elected official wants to deal with, especially if means they will have to affect their own wallets. But if elected officials do not stop lining their pockets when those in the private sector are forced to make financial sacrifices, voters should remember that come election time in the fall and remember that the politicians are using taxpayer money for their own retirement.
For my prior post about the pension issue, see here.
Dilip Paliath has a general law practice in Towson. For more information, see www.paliath.com.