No, Gov. Martin O'Malley won't toss out traditional pensions for newly hired state teachers and other employees, as Alaska and Michigan have done.
He's not turning retiree health care plans over to the unions, as policymakers have proposed in New Hampshire. He won't cut cost-of-living adjustments for existing employees and retirees. That's what happened in Colorado, Minnesota and South Dakota, to great protest and litigation.
The governor has avoided the most radical fixes for Maryland's troubled pension and retiree health care programs.
Even so, the proposed reforms are a substantial attempt at addressing one of the state's most alarming financial challenges. If the changes revealed Friday are enacted, they'll save taxpayers billions in coming decades without threatening Maryland's ability to hire and retain good people.
O'Malley's plan "echoes a lot of reforms that other states have enacted," says Kil Huh, research director at the Pew Center on the States.
It's just not clear that they'll be enough to fix things for the long term. If the economy, stock market and health care inflation don't cooperate, Maryland policymakers will find themselves in the same situation a few years from now.
For all its problems, at least Maryland's system doesn't stink with abuse like pensions in, say, California.
There is no "spiking" in the Maryland system, in which employees rack up overtime just before they retire to fatten pension checks. Maryland pensions are tied to base pay, says Michael Golden, spokesman for the Maryland State Retirement and Pension System.
"Double dipping" is difficult because if retirees return to state work, their pensions are adjusted downward. (Some politicians do draw double pensions by collecting from counties or cities as well as the state offices.)
And in contrast with California, where more than 9,000 retirees collect at least $100,000 a year in state pensions, only about 100 Maryland state retirees are in the six-figure club, according to a spreadsheet I requested from the system.
Maryland's average pension payment for state retirees was $20,364 a year at the end of 2010. That includes thousands of retirees who worked for the state only a few years, which drags down the average.
Even so, only about 7,000 Maryland retirees — 6 percent of the total — get yearly pensions of more than $48,000. Few people, if any, are getting rich off the Maryland retirement system.
O'Malley is basically proposing to undo pension upgrades approved by Gov. Robert L. Ehrlich Jr. a few years ago.
The changes under Ehrlich increased the annual "multiplier" through which employees get retirement credits — to 1.8 percent of their pay from 1.5 percent — while also raising employee contributions from 3 percent to 5 percent. (Here's partly how it adds up: Work 30 years with a multiplier of 1.5 percent, and you end up with a pension equal to 45 percent of pre-retirement pay. With a 1.8 percent multiplier, the pension is 54 percent of what you made when working.)
For future service of existing employees, O'Malley wants to chop the multiplier back to 1.5 percent unless they increase contributions even more — to 7 percent.
(Perspective: The average multiplier for state pensions nationwide is 1.8 percent, says Keith Brainard, research director for the National Association of State Retirement Administrators. The average employee contribution is 5 percent.)
For future employees, the proposed changes are more profound: a 1.5 percent multiplier and required contributions of 7 percent of their pay. Retirement cost-of-living increases for future employees would be capped at only 1 percent after years in which the pension investments failed to meet goals and at 3 percent even if they did. Current pension members get cost-of-living raises of as much as 5 percent or more, depending on how much they contribute to the system.
Naturally, employees are unhappy about the change. "We're going to fight like hell against it," Patrick Moran, president of the Maryland chapter of the American Federation of State, County and Municipal Employees, told The Washington Post.
Maybe, but they are unlikely to get a sympathetic hearing from Maryland's 220,000 unemployed people. True, state workers have had to put up with pay freezes, furloughs and now pension adjustments. But few state employees have been laid off in the worst economy in eight decades.
O'Malley's proposals leave a generous retiree health plan for Maryland employees largely intact as well as a traditional pension that's increasingly hard to find in the private sector. A 65-year-old state retiree with a guaranteed pension of $30,000 is in roughly the same financial position as a private-sector retiree the same age with 401(k) savings worth $350,000.
O'Malley's proposals would supposedly achieve 80 percent funding for Maryland pensions by 2023. (After years of miserable stock market performance and underfunding by Annapolis, there's only enough money to cover about 64 percent of what's owed now.) The governor's adjustments to a prescription drug plan would also cut retiree health liabilities by $7 billion.
But reaching those goals depends on multiple assumptions about the future. And even if they are achieved, they'll still leave Maryland taxpayers holding the bag for billions in unfunded liabilities — $9 billion for retiree health care alone.
It's a measure of the hole Maryland has dug for itself that the governor's proposals, substantial as they are, don't necessarily achieve the "path to sustainability" that he claims.