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Baltimore mayor wants no pensions for new hires

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Responding to projected budget deficits that could bankrupt city government, Baltimore Mayor Stephanie Rawlings-Blake has proposed ending pensions for newly hired civilian employees and moving to a hybrid pension plan for new police hires.

The proposed pension reforms were part of a broad package of cuts that Rawlings-Blake announced Monday in her State of the City address. The Democratic mayor also wants to cut the city work force by at least 10 percent over eight years and increase the number of hours that firefighters work.

The city faces $750 million in budget deficits over the next decade, according to a forecast from an outside consultant hired by the Rawlings-Blake administration. The report concluded that major reforms are needed to prevent bankruptcy.

In addition to ending pensions for new hires and implementing a defined-contribution retirement plan, Rawlings-Blake also proposed forcing current city employees to contribute to their pension plans for the first time. The contributions would be offset by pay increases but would still save the city money.

“We must shift to a 401(k)-style retirement plan for all new civilian hires,” Rawlings-Blake said. “The private sector has adjusted to this model. It’s time for Baltimore to change.”

New police officers would get a 50-50 split between a defined-benefit pension and a defined-contribution plan under the mayor’s proposal.

Robert Cherry, president of the city’s police union, said the union was willing to discuss pension reform but that the city risks attracting less qualified or capable police recruits if it moves to a hybrid plan.

Baltimore firefighters currently work 42 hours a week, and if that schedule continues, the city will have to close more firehouses, according to the mayor. Firefighters work longer hours in 19 of the 25 largest U.S. cities, with a median work week of 52 hours, city officials said. Any change to the firefighters’ schedule would have to be negotiated with the union and would be accompanied by a pay raise, officials said.

Rawlings-Blake also wants to impose a fee on residents for trash collection and use that money to lower the city’s property tax rates, which are the highest in Maryland by a wide margin. She also proposes streamlining the city’s vehicle fleet to reduce maintenance costs and make some jobs obsolete.

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The forecast performed for the city by Philadelphia-based Public Financial Management Inc. found that the city’s anticipated expenditures would continue to outpace revenues over the next 10 years. Health care benefits for retired workers will be a major driver of the projected deficits, the report found.

Baltimore’s tax base has been eroding for decades. The city’s population peaked at 950,000 in 1950 and now stands at 619,000. Although the decline has slowed, there have been few signs of the trend reversing. The median income is $40,000, and 22 percent of the city’s residents live in poverty, according to Census data. Baltimore also has 16,000 vacant structures.

If the reforms are enacted, the city could afford to spend $100 million over 10 years to tear down about a quarter of those vacant buildings, according to the mayor’s remarks.

The City Council would have to approve Rawlings-Blake’s proposals.

Councilman Nick Mosby said he appreciated the mayor’s attempt to take a longer-term approach to the city’s financial problems and that he was interested in seeing details of her proposals.

“If it’s effective, it could, for generations, put Baltimore in a better financial light,” Mosby said. “There has to be some sort of pension reform across the board.”

See also:

Differences in pension plan rules determine annuitization rates

Defined contribution assets to hit $7.3T by 2017

SOA Study: Private Pension Costs are on the Rise