Finalizing a budget for Harford County Public Schools is difficult in the best of times and these are not the best of times.
Like all public school systems in Maryland, Harford County Public Schools depends upon state and local government for revenue and must negotiate its largest expense, employee compensation, with a number of employee unions. Given that government funding and labor contracts are loaded with variables and determined on different schedules, putting together an operating budget of nearly half a billion dollars is vexing enough. Planning for next year’s budget is even more so, thanks to a few new wrinkles on the horizon.
Wrinkle #1 – Labor Relations
The Maryland Public School Labor Relations Board (PSLRB) has the power to issue binding decisions when, after several tries, a local school board and an employee union can’t come to terms. Whether or not the PSLRB can compel a school board to fund salary increases in a tentative contract negotiated before funding levels were determined, is a matter of some dispute. Since the PSLRB is newly established and has yet to issue such a decision, only time, and perhaps a trip to court, will tell.
This year, Harford County has a good shot at being a test case for decisions by the PSLRB. The Harford County Education Association, representing 3,200 employees, and the Harford County Board of Education have not found common ground on a contract for the current school year. The teachers’ union says the school board has money to fund salary increases – the tentative contract agreed to last January included a 3% cost of living increase – but the school board didn’t get money requested from county government to pay for the raises. If the school board is ultimately ordered to fund teacher raises and the ruling sticks, the money would have to come from somewhere. That could mean cuts to other areas of the school budget with a ripple effect into next year.
Wrinkle #2 – Maintenance of Effort
In Maryland, local governments are required to fund their school systems each year, at a minimum, at the same amount per pupil as the previous year or risk future increases in state education aid. Known as Maintenance of Effort (MOE), this funding level is often exceeded when times are flush but in the economic downturn some county governments have gotten MOE waivers from the State Board of Education. As the lean times continue, the Maryland Association of Counties plans to push for changes to MOE, adding another uncertainty in an already uncertain year thanks to Wrinkle #3.
Wrinkle #3 – The Pension Shift
Gov. Martin O’Malley has proposed shifting a portion of the cost of teacher pensions from the state to the counties beginning next year. The State of Maryland currently pays 100% of the pension contributions and some kind of cost sharing has been threatened for years. This time the shift may happen, although the Governor’s proposal is still subject to the vagaries of the state legislature.
Gov. O’Malley hasn’t proposed shifting the full burden but rather a 50/50 split and even then, his proposal eases in with a number of offsets for next year. If all the offsets are approved by the 2012 Maryland General Assembly, the pension shift is expected to cost Harford County $1.3 million next year. Without the offsets, the shift will cost Harford County $8.3 million.
Also up in the air is whether or not the pension costs will count toward the required Maintenance of Effort. If a portion of required county funding for education is diverted to pay for teacher pensions, local school boards will feel the pinch. If the counties have to pay for teacher pensions plus MOE, the effect of an $8.3 million pension shift to Harford County next year will be “catastrophic”, according to County Executive David Craig.
Harford County Executive Craig Speaks Out on Gov. O’Malley’s Plan to Shift Teachers Pension Costs to County Governments
In light of the proposal by Gov. Martin O’Malley to shift a portion of the cost of teacher pensions to the counties, The Dagger posed a series of questions about the plan to Harford County Executive David R. Craig. Below is the text of the Q & A.
Dagger: Does the Governor’s proposal indicate whether or not the cost of teachers’ pensions will count toward Maintenance of Effort? If not, how will that be decided?
County Executive Craig: “We have not seen a definitive answer either way, but it is only logical that it should count toward Maintenance of Effort. Pushing the added expense down on the counties will be harmful enough, but not counting the costs toward MOE essentially means that Harford County would have to meet MOE plus $8.3 million next year alone. The effect of that on our budget and on our taxpayers would be catastrophic.”
The three “cost drivers” cited by the Governor in his proposal are pension benefits, the pension system investment returns, and salary increases for teachers. None of these three things are controlled by county governments in any way. Furthermore, the Governor’s argument that pensions should be shifted to counties because the state does not determine pension costs makes no sense, because county governments do not make teacher salary or pension decisions either – local school boards do. County governments are now being asked to pay for something that they had no role in negotiating.
The state seems to want to have it both ways. A common refrain from the O’Malley Administration in presenting this proposal is that the counties need to have “skin in the game” because otherwise the locals will spend willy-nilly when it comes to teacher salaries and benefits. State-mandated requirements as they relate to Thornton and MOE, however, have driven the local share in education costs higher and higher for the last decade. The state now seems to be telling counties that they are spending too much and not enough at the same time.
The state is also ignoring the fact that the size of the workforce also plays a very major role in pension costs. Changing the teacher-student ratio and adding required programs forces the county to fund a larger number of employees.”
Dagger: Are projected county revenues for Fiscal Year 2013 or savings from other areas enough to cover the cost of the teacher pensions or are cuts anticipated?
County Executive Craig: “No. Even if one assumes that the “offsets” provided by the state are real, Harford County would still have to come up with an additional $1.3 million next year to fund teacher pensions. And, at the state’s own admission, these offsets become less substantial or reliable in the out years. But, the figures cited by the state as offsets are dubious at best. For example, $37 million of the $245 million that the state is putting forward as “fiscal relief” for next year is the result of the state waiving the repayment requirement to the Local Income Tax Reserve Fund. But, this was a new requirement that was not to begin until FY 2013 anyway, and as such is not a revenue stream and cannot really be considered cash-in-hand. Finally, all of the offsets assume that the legislature will follow through on each of them by closing loopholes and eliminating tax deductions, which is far from assured.”
Dagger: If cuts are needed, in what areas will they be considered – school funding? furloughs or layoffs of county employees? cuts in services? If cuts are needed, what areas are off-limits, if any?
County Executive Craig: “It is too early to start thinking about what will need to be cut and what is off-limits. Clearly this would put a serious strain on our budget. The costs involved could potentially wipe out the gains we have made through our conservative fiscal policies and places a new burden on our taxpayers.
We are still hopeful that there are enough legislators in Annapolis who understand the gravity of the situation and see the effects that this shift would have on county governments to kill this proposal. My administration will be lobbying hard against this proposal, and will be presenting a unified message with our allies in Annapolis such as MACo.[Maryland Association of Counties]
In this proposal, I liken the state to parents who have stopped giving their children an allowance and are now robbing their children’s piggy banks so that they can continue to spend money on whatever they see fit. Pushing the problem down to the counties does nothing to fix the situation; it is just a way of spreading the misery.”