Gov.-elect Larry Hogan is busy constructing a budget to give to state lawmakers this week. But next on Hogan’s to-do list is a thorough examination of the state’s underfunded pension system – and how it will affect the budget his team has just put together.
From the Baltimore Sun:
The Maryland State Retirement and Pension System had only about 69 percent of the assets needed to pay for future and current retirees’ pensions in the last fiscal year — well below the at least 80 percent target that many experts consider healthy.
Robert Neall, Hogan’s fiscal adviser, called the nearly $20 billion unfunded liability in the state retirement system “an area of concern.” Hogan’s team has been busy putting together a budget to present to the Maryland General Assembly on Jan. 23, but Neall said the administration will soon begin examining the health of the pension system.
“That’s going to require higher pension contributions [from the state] probably for two decades, that’s why it’s a concern,” Neall said. “They are just facts that we have to contend with as we put together a fiscal ’15 closure and a fiscal ’16 budget to present to the General Assembly.
Michael Golden, a spokesman for the state pension system, said reforms made to the pension system in 2011, including requiring most employees to contribute 7 percent of their salaries into the fund instead of 5 percent, put it “on the road to stability.”
“We feel like were on track to get to the 80 percent funded ratio by 2024; we think that’s a good track to be riding on,” Golden said. “We have no plans at this moment to do anything differently.”
Robert Burd, the retirement system’s acting chief investment officer, said the board chose to reduce the percentage of money invested in stocks — about 39 percent was invested in stocks in 2014, less than most other states — after the recession because of concern about risk. While Maryland has not enjoyed as much of a benefit from the rebound in the stock market, Burd said, the change leaves the fund less exposed to future downturns.
“That’s why we don’t look as good as some of our peers do when it comes to rankings,” Burd said.
Maryland’s pension system manages $45.4 billion in assets for 143,000 retirees and is 69 percent funded.