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Other mayors' pensions top Dixon's

Benefits often generous for those in charge of pension plans

By Robert Little

January 9, 2010

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With her annual pension secured by a plea agreement and a promise to leave office, Mayor Sheila Dixon can soon enjoy one of the most lucrative retirement benefits of any public employee in Maryland.

Her $83,000 annual pension, based on 22 years in elected office, is more than twice that available to top leaders of the Maryland General Assembly, and $20,000 higher than retirement pay for a similarly tenured member of Congress.

Yet while the size of Dixon's pension places her in select company of Maryland political retirees, within the small community of retired metropolitan mayors across the country the sum hardly stands out. The former mayor of Philadelphia recently retired with a pension $22,700 higher, for instance. And the mayor of San Diego collects a police department pension larger than Dixon's even as he continues to serve and draw a salary as mayor.

Pension analysts say the figures spotlight a scarcely noticed detail of the continuing national debate over the appropriateness of fixed-payment pension plans for government employees - that elected officials in charge of public pension plans often enjoy the most generous retirement packages.

"I'm shocked that any officeholder in Maryland would get a reward like that at taxpayer expense," said Pete Sepp, vice president for policy and communications at the National Taxpayers Union, a conservative lobbying group that has railed against what it sees as exorbitant pension benefits for elected officials. "That's a pretty nice payoff for a career that's ending in a lot of controversy."

Before the mid-1980s, the mayor, comptroller and City Council members collected the same pension benefits as any other city employee. But then the council, following a path that is well-worn throughout American municipalities, chose to create a new tier of retirement benefits for elected officeholders that is superior to the rank-and-file plan in several ways.

For one, an elected official's pension is calculated as a percentage of the salary they would earn today, and is recalculated if the salary for that position ever goes up. Other city retirees earn benefits based on what they earned when they were working.

Also, elected officials are entitled to 2.5 percent of their job's annual salary for each year they work, whereas civilian employees in the city earn 1.6 percent a year. Police and fire employees earn 2.5 percent for the first 20 years and 2 percent after that.

"The elected officials' plan certainly has a better benefit structure," said Thomas P. Taneyhill, executive director of the city's Fire and Police Pension plan, which ties a retiree's benefits to the salary they earned in employment.

Dixon knows well the pension system for fire and police retirees in Baltimore, having sought to cut some of its benefits last year to resolve a $165 million gap in the plan's budget. The fire and police plan, which is also regarded as a plum benefit, calls for an automatic benefit increase linked to stock market performance, and Dixon's office wants to eliminate it.

The pension plan for elected officials, which pays benefits to only a few dozen people, is separate and fully solvent. Supporters of it note that Baltimore officials pay into the plan with 5 percent deductions from their salaries, and they call it just compensation for the potential earnings that elected officials often forgo when they choose to take public office.

"When you think about the salaries of the mayor and comptroller, and you think about what one of these individuals might have been able to earn outside of elected office, I don't think it's out of line," said Councilwoman Helen L. Holton, who chairs the council's Taxation, Finance and Economic Development Committee.

And whereas the pensions of higher-paid officials like the mayor might raise eyebrows, payments to City Council members aren't as conspicuous, she said. If she were able to collect retirement benefits today, with 14 years' service, Holton's annual pension would be about $20,000.

"There's nothing in the city charter that says a council member's job is supposed to be part-time," Holton said. "Some people think it is, but I'll tell you, it's 24/7. I don't think that kind of pension benefit is out of line."

Nor do other jurisdictions across the country, apparently.

Former Philadelphia Mayor John F. Street retired in 2007, after eight years in office and another 19 years on the Philadelphia City Council, with an annual pension of $115,700.

Five-term Memphis, Tenn., Mayor Willie Herenton resigned earlier this year eligible for a $75,000 annual pension, but opted instead for a lump-sum payment of more than $500,000.

San Diego Mayor Jerry Sanders collects a $92,000 annual pension from his 26-year career on the city's police force, which included six years as police chief.

Analysts who specialize in public pensions say there is no standard pension value for elected officials in the U.S., who account for just a sliver of the benefits paid by the country's 2,600 public-sector pension plans. As such, decisions about what benefits elected leaders earn are typically matters of politics, not public policy, they say.

"I think you'll find that retirement benefits for elected officials run the gamut, from rather stingy 401(k)-type benefits to the more traditional defined-benefit plans," said Keith Brainard, research director for the National Association of State Retirement Administrators.

A comparison of retirement benefits available to state legislators around the country bears that out. In Illinois a legislator can earn up to 5 percent of his or her annual salary for one year of service. In California, legislators get nothing for retirement.

Members of the Maryland General Assembly - part-time lawmakers who earn an annual salary of $43,500-– must contribute 5 percent of their pay to participate in the Assembly's pension plan, and can earn an annual benefit of as much as two-thirds of a full salary, or $29,000 at today's pay rate.

The Baltimore County Council began reviewing its retirement benefits late last year when word got out that retiring Councilman Vincent J. Gardina had earned a pension equivalent to his entire $54,000 salary for life.

The most lucrative arrangements are typically available only to top executives. Maryland's governors get a lifetime pension based on a percentage of the sitting governor's salary - one-third if they served one term, and one-half if they served two terms. That means former two-term governors like Parris Glendening and Harry Hughes are collecting $75,000 a year, based on the current gubernatorial salary of $150,000. One-term governor Bob Ehrlich will be eligible for a $50,000 pension at the end of 2012, when he turns 55.

Perhaps the best-compensated political retiree in Maryland is former governor, mayor, city councilman and state comptroller William Donald Schaefer, whose combined annual pension has been estimated at roughly $165,000, not counting whatever he earned serving in the U.S. Army.

Dixon's pension is based on the current mayoral salary of $151,700. With 22 years in elected office, both as mayor and council member, she is entitled to 55 percent, or just over $83,000 annually. In addition, she also will be eligible for state retirement benefits for the years she worked as a teacher.

The average annual pension for the city's 8,600 retired municipal employees, meanwhile, is roughly $12,000, according to the most recent report from the Baltimore City Employees Retirement System. Among the city's 6,000 police and fire department retirees, the average annual pension is $33,765, according to Taneyhill.

Of course most retirement benefits pale compared to those afforded former U.S. presidents, who receive an annual pension equal to the basic pay rate for Cabinet-level executives, or more than $190,000.

Yet there are pension-related parallels between Dixon and one former president. Richard M. Nixon, like Dixon, was able to keep his pension benefit by resigning from office rather than allowing the public corruption charges against him to go forward. Federal law only gives pension benefits to someone "who was not removed from office pursuant to impeachment and conviction in the Senate."