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Delegate Steve Lafferty's News from Annapolis


The last two weeks were frenetic and packed as we get closer to Sine Die, April 11. While the bill hearings have gotten shorter, our voting and committee decision lists have grown and debate on the bills has been extensive. But, it is the budget that has dominated the conversation and time. This included 5 hours of debate by the House on Wednesday and another 2 hours Thursday before the budget was passed.

State Budget

This year, despite stabilizing revenues, the State faced a $2 billion structural deficit. The budget, as presented by the Governor, reduced the structural deficit by 35%. The House improved on this by reducing the State’s structural deficit by over 40% and cut ongoing spending by $800 million. Below are some highlights of the House budget plan:

Conservative Spending Plan

·         Reduces $2B structural deficit by 40% by cutting ongoing spending by nearly $800M

·         Maintains a 5% Rainy Day Fund ($640M). Maryland continues as one of only 8 states in the country that has not tapped its Rainy Day Fund, during the global recession

·         Leaves $123 million cash balance, in addition to the Rainy Day Fund, for a total of over $800M in cash reserves

·         General Fund spending is at about the same level of spending in FY09

·         Eliminates $7B in long-term retiree healthcare liability over the next 10 years

Restores Funding for Education

·         Restores $58.5M in K-12 education spending, to bring per pupil funding back to FY11 levels. Every county in the State will also receive additional federal dollars through the Education Jobs funding or Race to the Top funds, or both.

·         Provides funding to limit a tuition increase for colleges and universities  to 3%

Supports Transportation System

·         Provides additional money to counties and municipalities for road maintenance

·         Raises modest fees on certificate of title on new vehicle purchases and vanity tags to replace $50M in the Transportation Trust Fund

·         Requires any new transfer from the Transportation Trust Fund be repaid within 5 years,to protect the long-term sustainability of the State’s transportation system

Maintains Commitment to State Employees

·         No furloughs for the first time in three years. State employees have absorbed over $500M in reductions to benefits and salaries, as a result of the global recession

·         One-time $750 bonus and acknowledges that State employees have each lost an average of $3,100 in pay over the last three years.

·         Ensures long-term sustainability of the State’s pension system, including preserving a defined benefit system and relieving some burden on retirees from the Governor’s proposal

Invests in Economic Development to Jump Start the Economy

·         Preserves funding for business loan and loan guaranty programs.

·         Funds the Biotech Tax Credit, stem cell research programs and provides funding for Nanotechnology. Maryland was ranked 2nd by the US Chamber of Commerce and National Chamber Foundation based on growth and investment in STEM jobs and R&D investment.

Reforming the State retiree Benefit System

Pension costs are one of the biggest cost drivers in the budget, with an estimated overall State liability of $1.5 billion in General Funds for FY12.  There are three factors driving underfunding of the pension system:

·         the 2006 pension enhancement, which was unanimously passed by the legislature in 2006 and was signed by Governor Ehrlich, making retroactive enhancements for state employees/teachers;

·         steady increases in the teacher salary base at the local level, partially funded by the State’s Thornton program; and,

·         declines in the retirement system assets because of the global recession.  The retirement system experienced a loss of $4 billion from October 2007 to June 2008. 

The House made the decision not to uniformly shift the teacher pension liability to local school systems, but instead, took steps to reform the pension system. The House plan asks local jurisdictions to assume some of the costs of administering the teacher’s pension plan.

The House made a commitment to (1) maintain a defined benefit pension system and (2) identify a way to relieve some of the burden on retirees for prescription costs from the Governor’s proposal, both while increasing the viability and sustainability of the pension system long-term.

·         Makes changes to vesting requirements

o   New employees will vest at 10 years instead of the current 5 years. The early retirement age for new employees is moved from 55 to 60 years of age.

o   New employees will have to be 65 years old with 10 years of employment, or have 30 years of service regardless of age, to collect a benefit

·         Aligns Prescription Drug Benefits for Active & Retired Employees

o   Rejected the Governor’s plan because of concern of drastically increased costs

o   Instead, retiree co-pays will be increased slightly to align with the cost to current employees; the out-of-pocket cap will be increased from $700 to $1000, instead of the Governor’s proposed $4550. Monthly premiums for retirees will increase slightly, on average $10/month.

o   Requires retirees to enroll in the Medicare Part D benefit by 2020, reducing almost half of the pension system’s unfunded liability.

o   Beginning in FY13, the State will reinvest savings from these reforms into the retirement system to reduce the unfunded liability by more than $1 billion over the next 6 years and achieve 80% funding of the system by FY23.

·         Employee Contributions

o   Increase all employee pension contributions from 5% to 7%.

o   Current employees will retain the 1.8% multiplier. New employees will have a 1.5% multiplier.

·         Balancing Retirement Benefits Across All Systems

o   The General Assembly Compensation Commission will review legislative pension proposals

o   LEOPS (Law Enforcement Officers Pension System) will pay the same as State employees and teachers

o   Judges will also contribute an additional 2%, bringing their total to 8% contribution rate

o   Increasing vesting requirements to 10 years for all systems (except judges, due to a statutory quirk)


You can find the two budget bills, HB 70 and HB 72, at And, feel free to contact me at if you have any questions.

Best wishes,


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