2 Parties, 1 Political Playbook: How Teachers Lose in Christie, O'Malley Policies
Few would accuse New Jersey Gov. Chris Christie and Maryland Gov. Martin O'Malley of being political twins. Yet when it comes to teacher pensions, they're following nearly the same playbook.
With their states facing large pension shortfalls, both O'Malley, the Democrat and self-described "numbers guy," and Christie, the Republican who tries to be a tough-talking everyman, championed comprehensive pension "reform" packages that cut retirement benefits for new teachers.
New Jersey's teacher pension fund went from a $2.8 billion surplus in 2000 to a $16.3 billion deficit by the time Christie took office in 2010. In 2010 and again in 2011 he convinced legislators to enact benefit reductions for new teachers by raising the retirement age, reducing their pension benefits, and eliminating disability retirement benefits.
Maryland's pension debt ballooned from $2.8 billion in 2004 to $19.7 billion by 2011, when Governor O'Malley sponsored legislation raising mandatory teacher contribution rates, reducing the amount pensions could adjust in response to rising inflation, raising the normal retirement age, and increasing from five years to 10 the time a teacher must continue teaching in Maryland before earning even a minimal pension. (this last change alone means more than half of all new Maryland teachers won't qualify for a pension from the state pension system.)
Of course the two politicians speak about pensions quite differently. O'Malley specifically billed his reforms as necessary changes to preserve Maryland's existing defined benefit pension plan, whereas Christie openly talked about more radical, structural change to the retirement system. Still, the end result was the same in both states: a more expensive but worse retirement plan for teachers.
Next, both Christie and O'Malley promised to pay more into the pension fund, but only at some later date. Christie, who says he's the rare politician willing to tell voters the hard truths, agreed to a 7-year gradual increase in pension payments that would eventually reach the full, actuarially required annual amount in 2018 (New Jersey has failed to pay the full amount of what actuaries say the pension plan needs every year since 1997). Christie has stuck by that commitment so far, although in January of this year he made noise about not being able to meet those scheduled payments in the future, and his latest budget proposes further benefit cuts.
O'Malley, who in a 2011 speech lambasted Christie for not making the "tough choices" necessary to "invest in our future," made similar promises. Three years ago he agreed to pour $300 million annually of the savings from the 2011 changes back into the pension fund to help shore up the plan's funding. His 2014 budget reneges on that assurance and shifts $100 million of the pension savings into the general fund. Even a budget-conscious, supposedly forward-looking Democrat like O'Malley would rather devote state budget expenditures to current services than to making the pension system more financially sound for the future. It's a good example of why it's so hard to fix public sector pension problems.
Why are O'Malley and Christie using the same playbook on such a contentious and frequently partisan issue? Primarily because there are no incentives for them to do the right thing.
Instead of paying what the pension funds need on an annual basis, politicians listen to taxpayer demands to use current money to pay for current services, and they rely on the hope of exceptional stock market returns to pay the future retirement benefits of current teachers. If that hopes turns out to be blind faith -- as it usually does -- well, that's some other governor's problem.
When advocates for traditional defined-benefit pensions say, "Pension plans would be in better financial shape if states made their required contributions," that's true, but only half the story. The other half is that the current structure carries no cost for politicians who make pension promises but fail to live up to them.
Teachers across the country must stop enabling this system, which is bad for their personal retirement and also for their profession. Instead, they should insist that all forms of compensation -- including retirement benefits -- are paid for upfront and that benefit promises are matched by real contributions. It's politically tough medicine for all sides in America's ongoing debate about pensions, but a vital step to protecting taxpayers from ballooning benefit obligations and ensuring the nation's teachers have a secure retirement.