December 17, 2017

Priority Issue: Teachers’ Retirement Cost Gap in FY 2017

 

Teacher Retirement Funding Agreement Reached

MABE News Release – November 30, 2016 – PDF version

MABE welcomes the announcement that the Governor, Speaker of the House, and President of the Senate have agreed to approve both a conditional loan for Northrop Grumman as well as legislation in 2017 to provide additional state funding to reduce teacher retirement costs for public school systems.

In 2012, the General Assembly shifted 100% of teachers' retirement costs for current employees to local boards of education. From 2013 to 2016 school board funding obligations were matched entirely by mandated local government payments to local school boards. Beginning in 2016, any future growth in the retirement costs is included in the bills received from the State Retirement Agency by local boards of education. Maryland's local boards of education are experiencing a substantial gap between local government funding and the amount the State Retirement Agency is billing school systems for teacher retirement costs. In FY 2017 and subsequent years, the growth over FY 2016 is estimated to be nearly $25 million statewide.

Shifting teacher retirement costs to local governments and school systems has placed considerable strain on local government and local board of education budget decisions. The additional unfunded gap presents a significant additional challenge for local boards in the coming years. MABE supported legislation in 2016 (House Bill 934/Senate Bill 674) to address this serious threat to the budgets of local school systems across the state. This legislation did not pass; and additional funding set aside by the legislature was not allocated to school systems following the 2016 session.

Today's announcement would close the teacher retirement funding gap in the future; ensuring that unfunded increases in retirement costs do not compete with funding for the classroom.

(Baltimore Sun article; Washington Post article)

Background

Maryland’s 24 school systems face a gap between local funding and their State Retirement Agency bills for shifted teacher retirement costs. In 2012, the General Assembly shifted 100% of the “normal” cost share of teachers’ retirement costs to local boards of education. Since FY 2013, school board funding obligations have been matched substantially by mandated local government payments to local boards. (See the funding tables from HB 1301(2012))

In accordance with the law, in FY 2016 the shifted cost was rolled into the mandated maintenance of effort amount each local government must provide going forward. This means any future growth in the “normal” costs will be included in the State Retirement Agency bills received by the local boards, without any provision of a funding source. In FY 2017, the growth over FY 2016 is approximately $25 million statewide.

During the 2016 legislative session, legislation was introduced but not enacted (SB 674 Fiscal and Policy Note) which would have mandated future state funding for FY 2018 and beyond to alleviate this funding gap. In the alternative, language was included in the State Budget Bill (SB 190) to provide $19 million for FY 2017. However, the Budget Bill restricts a large package of $80 million in restricted funds; $25 million of which pertains to education funding including the $19 million for retirement costs. The budget requires that the Governor transfer all, or none, of the restricted funds to their designated purposes; the Governor may not elect to transfer only some of the restricted funds. The $25 million in education funding includes not only $19 million for teacher retirement costs but also $6 million for the public Aging Schools Program.

MABE wrote to Governor Hogan on April 25th to request his action to allocate these much needed funds.  The Governor announced on August 3, 2016 that he would not release the $80 million in restricted funds, including the $19 million for school system retirement costs. 

For more information, contact John R. Woolums, Esq., MABE's Director of Governmental Relations, at jwoolums@mabe.org or 410-841-5414.