With the pension system for City Hall workers facing nearly $700 million in unfunded liabilities, Mayor Stephanie Rawlings-Blake is introducing legislation today that would require employees to start contributing part of their salaries to the fund.
The bill would require Baltimore's non-public safety workers to contribute 1 percent of their salaries to the pension fund next fiscal year, and increase those contributions each year for five years until workers contribute 5 percent.
The legislation also would eliminate the so-called "variable benefit" for civilian retirees, which increases benefits when the fund preforms well, but doesn't decrease benefits when the market performs poorly.
The legislation is part of a 10-year plan Rawlings-Blake says is needed to fix city finances. The mayor wants to eliminate a projected long-term $750 million budget shortfall while cutting property taxes by more than 20 percent and giving employees' raises. Rawlings-Blake says she plans to increase salaries by 10 percent over the next five years.
"The costs of outdated benefits have crippled our ability to pay workers what they truly deserve in their paychecks," Rawlings-Blake said in a statement. "We must make tough choices to rebalance the way we compensate our hard-working employees by reforming unsustainable benefits and instead invest in better wages up-front."
The pension system for municipal employees, who do not currently contribute to their retirements, faces $681 million in unfunded liabilities, according to city documents. Fully funded in 2003, the system has weakened each year and is now only 67 percent funded. According to the mayor's office, the new legislation would save $53 million over nine years for current employees.
Rawlings-Blake also plans to introduce a bill today that would address a continuing legal battle with police and fire unions over changes she championed in 2010 to the public safety workers' pension system.
The administration said the bill would "safeguard the city's finances" in the event the unions win a legal struggle over a key provision of the mayor's pension overhaul, called cost-of-living adjustment increases. Under Rawlings-Blake's pension plan, police and fire retirees can receive cost-of-living adjustments — based on age — of up to 2 percent, but a U.S. district judge struck down that provision as unconstitutional. The new legislation would create a flat rate of 1.3 percent, regardless of a retiree's age.
The mayor said the legislation would only take effect if the unions win on that aspect of their suit. The case will next be considered by the Fourth District Court of Appeals in Richmond.
Michael B. Campbell, the president of the fire officers' union, said the mayor's bill would cut benefits for public safety retirees even more.
"I don't agree with it," he said. "We're in federal court right now. I don't know what she's trying to do."
According to city documents, the pensions for municipal employees are in similar straits as those for police and fire department employees, who will contribute 10 percent of their salaries to their retirements this year. The public safety pension system has $712 million in unfunded liabilities, and the percentage of fully funded liabilities stands at 77 percent
Rawlings-Blake said later this year, she plans to introduce additional legislation to create a 401(k)-style retirement plan for new City Hall employees and a "hybrid" plan for new firefighters and police.