9:00 AM EDT, October 18, 2012
Baltimore County's proposal to borrow $255 million through pension obligation bonds is downright reckless and another cheap trick to kick the can down the road rather than face the pension funding problem in a forthright manner ("Baltimore Co. weighs pension bonds," Oct. 14).
If borrowing is such a good idea, why not borrow enough to make the pension system fully vested? The risk is that the pension system underperforms enough in the early years of the bond issuance, such that the 4.5 percent interest rate becomes a further drag on a system that is not properly funded.
The power of compound interest is such that underperformance in early years means that the system cannot make up the difference in subsequent years. There are no guarantees that this will not happen, even by that financial oracle, Councilman Tom Quirk.
You can look up Baltimore County spending practices for the last two decades and see that spending has substantially exceeded the rate of inflation and that per-capita spending numbers are worse.
Little was done in the Ruppersberger and Smith administrations to deal with this pension problem, and now the legislature has kicked the can on teachers' pensions back to the counties.
And who is in charge? The same cast of characters that feathered their own nest as members of the council in a previous administration.
Fiscal mismanagement causes taxpayer flight, which only exacerbates the problem.
Local governments are finding out what GM discovered, namely, that you cannot pay so much to retirees that you take too much from current workers.
As the population ages and unfunded liabilities mount, at some point the Baltimore County Council will have to make the choice of some California subdivisions — that of either funding schools and public safety or funding retirement benefits for teachers and public safety employees who probably live in Delaware or Florida.
Whether you are liberal, conservative or progressive, arithmetic is arithmetic.
F. Patrick Hughes, Towson
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