Retiree benefits will strangle our [Baltimore] City

Feb 11, 2008 3:00 AM

by The Baltimore Examiner Newspaper

BALTIMORE (Map, News) - Baltimore City budget analysts predict
shortfalls of $20 million to $30 million next year as a result of
fewer, and lower-priced, real estate sales.

Given the city's fervor to sue Wells Fargo and possibly other lenders
to recoup lost revenue from foreclosed homes, property tax shortfalls
could also loom.

Not slowing down are payments needed to keep solvent city employees'
retirement packages.

Last year, payments jumped 18 percent from fiscal 2007 to $118
million, largely because of poor investment performance.

That is up from $25 million in 2000. And it does not count the city's
estimated $2.9 billion in unfunded obligations as of last year to pay
for health care for future retirees.

Ed Gallagher, director of the city's Department of Finance, says the
city plans to contribute about the same amount to retirement benefits
in 2009 as in this year's fiscal 2008 budget.

That would make sense if the stock market was performing well. But
it's not. Many 401K holders lost money last year and are still losing
money in stocks. The Dow Jones Industrial Average is down 1,358 points
since July 1, the first day of the current fiscal year. History tells
us investors will make money long-term, but losses in the next few
years could mean much higher contributions for city taxpayers to make
up the shortfall -- at the expense of funding schools, transportation
projects and other essential services. And as we have noted in other
reports, the city's returns have been below average due to poor
management by its chosen investment advisers.

Gallagher said the city had not yet finished calculating the new
unfunded liability for health care and how much it should contribute
to prepare for that obligation. Last year, the city set aside $15
million -- a figure many budget analysts said was inadequate.

What's clear is that without a major influx of new residents, city
taxpayers will be saddled with a mountain of debt in coming years. As
we have mentioned, the only way to lure new residents is to lower the
property tax rate, which is twice as high as other state
jurisdictions, and ask the city's major nonprofits to contribute a
bigger amount for their share of city services.

City taxpayers have spent hundreds of millions of dollars on "economic
development" in recent years with no net new jobs to show for it and
fewer than 1,000 new residents, if recent census evidence is correct.
So clearly the status quo is not working.

Procrastinating may give the city a few more years before it must
choose between funding schools and funding city employee retirement
benefits, but why must a crisis hit for City Council members and the
mayor to do the right thing? Do it now.

For more about Balti-$hit:

http://balti.what.cc
http://norris.ismad.com
http://omalley.ismad.com
http://baltimore.home-page.org
http://conventions.home-page.org
http://baltimore-tourism.home-page.cc

FBI Reports: Baltimore Remains ONE of the Country's Deadliest Cities!