support public schools and local services

STOP: Stop Transfer Of Pensions

We support the State of Maryland honoring its commitment to education by continuing to fund pensions.

Stop Transfer Of Pensions is a new grassroots organization dedicated to protecting public schools and local communities from a misguided proposal to shift hundreds of $millions in pensions obligations from the State of Maryland to the counties and Baltimore City. Maryland is facing serious financial / fiscal challenges. Past mistakes and the economic recession contributed to a huge shortfall in pension trust funds--estimated at $19 Billion last year, and growing. The proposed pensions transfer would shift 100s of $millions of obligations to the localities, dwarfing the amount previously shifted. With current overburdened local budgets, the results would be many times worse this time. We are working to Stop Transfer Of Pensions to the counties and Baltimore City for several reasons. Such a transfer would lead to increased crowding in classrooms, undermine achievement by Maryland's students, exacerbate fiscal stress in counties and in Baltimore, and cause cutbacks in services and many other serious problems. Please forward this email to concerned Marylanders!

Please contribute now to help STOP launch our website, plan public events, and organize support for sensible policies to address budget short-falls. Transferring pension obligations to the counties and cities would devastate local economies, hurt public schools, prevent needed maintenance, and delay or deny new projects by overburdening our local governments. We have better choices--untapped potential revenues Please support our efforts! Contribute and contact me to get involved. 

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Some background: During the Glendenning years, Maryland adopted the "corridor" formula which was not actuarially sound and therefore underfunded the pension systems. The recession--with the stock market and real estate shocks--depleted the value of assets in the pension trust funds. Also, poor investment decisions led to lower-than-expected return on investments. These three factors combined to leave the pensions underfunded.  STOP agrees Maryland must address this shortfall, but we propose real solutions to the underlying problems. If the state dumps some or all of these pensions obligations onto localities, the results will be disastrous. When the state stopped paying for Social Security for teachers some years back, class sizes increased dramatically and school construction ground to a halt. Students attended school in too-hot or too-cold trailers instead of classrooms.

Transferring pensions to localities does nothing to address the real problems. It would merely pass the buck--really billions of bucks--in a way that would exacerbate local fiscal problems. The same crunch Maryland faces on the state level is also hurting localities, leaving budgets overstressed and putting jobs and services on the chopping block. The counties and Baltimore City cannot afford to shoulder the pensions burden. Shifting that burden will not make it any smaller or easier to bear.

Shifting pensions obligations would hit Montgomery County particularly hard, but all local jurisdictions will suffer. MoCo has a restrictive revenues formula, making it very difficult to increase revenues. If the counties and Baltimore have to pay for pensions, they will lose many of the best teachers, and have to slash public services, layoff workers, and close facilities including schools, libraries, and county offices.

We've seen this problem coming for some time. WTOP.com reported in January 2009: "[Montgomery County Executive Ike] Leggett plans to make sure that Montgomery County does not get stuck with the state's bill for teacher pensions. The pensions [transfer] would add another $100 million to the county's current fiscal shortfall of approximately $500 million." Quoting Leggett's analysis of the problem, "I don't think that was some kind of conspiracy," says Leggett, "It's just simply a reflection of some of the errors and negligence that occurred at the state level." Fast forward to September 2010, and WTOP.com reported the same concerns. "[Ike] Leggett projects a more than $200 million shortfall for fiscal year 2012, or more depending on income tax returns and whether the state shifts more costs to the county. [Former] County Council President Nancy Floreen says it's too early to say where cuts should come. 'The other things on the table this year are what's going to come out of Annapolis,' Floreen says. One of the big questions is whether state lawmakers will require counties to pay for teacher pensions. Currently, the state pays teacher pensions." See: http://www.wtop.com/?hlpage=255&nid=706&sid=1565430 (2009 article) and http://www.wtopnews.com/?sid=2063361&nid=25 (2010 article).

STOP agrees Maryland lawmakers must take decisive action to address this shortfall, but we propose real solutions to the underlying problems, not treating the pension obligations like a hot potato. Last year, then-Delegate, current State Senator Roger Manno filed HB 10 to protect education and public services by fully funding pensions on the state level. He called for combined reporting, progressive taxation, and other state-level revenues to shore up the pensions trust funds. Combined reporting would close a loophole some corporations use to avoid paying all or part of their taxes on income earned in Maryland. Other states have enacted combined reporting, and found that it's a fair and effective method to accurately determine how much corporations should pay to states. The formula is precise and detailed, leading some to claim it's "too complicated." The complexity is required to accurately assess tax burdens. See: http://mcprogressive.wordpress.com/2010/01/09/wth-is-combined-reporting-and-why-do-we-need-it/

An article prepared by the New Rules Project explains combined reporting: "Many retail chains earn profits at stores nationwide, but have developed an accounting scheme to evade paying their full share of state corporate income taxes. Tax experts believe the practice is costing states billions of dollars in lost revenue.  It has also given chains an advantage over locally owned businesses, which must pay state income tax on all of their earnings. Twenty-one states are not vulnerable to these tax-evasion schemes, because they have enacted a policy known as combined reporting." The article lists corporations using loopholes to avoid taxes in Maryland and other states including The Gap, Home Depot, Ikea, Kmart, Kohl’s, Limited Brands (which owns Bath & Body Works, Victoria’s Secret, The Limited, Payless Shoes, and other chains), Staples, and Wal-Mart as companies that escape taxes, but which would be forced to pay their fair share under combined reporting.

Also from the New Rules Project: "As of November 2010, twenty-three states have adopted combined reporting. These states are: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, Montana, Nebraska, New Hampshire, New York, North Dakota, Oregon, Texas, Utah, Vermont, West Virginia, and Wisconsin." By contrast Maryland is one of the states that "have not adopted combined reporting and are vulnerable to chains escaping their state tax obligations by shifting income to subsidiaries." See: http://www.newrules.org/retail/rules/level-playing-field-taxation/combined-reporting

Maryland can and should close this loophole, and STOP believes Maryland should use those and other revenues to address the pensions short fall--as outlined in HB 10. STOP remains open to any and all proposals that actually address the situation while protecting public schools and local services.

We need your help. Support public schools and local services. Please contribute to STOP:
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Contributions to STOP are not tax deductible.