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BILL: HB 352
DATE: February 27, 2025
POSITION: Favorable with Amendments
COMMITTEE: House Appropriations & Ways and Means Committee
CONTACT: Mary Pat Fannon, Executive Director, PSSAM
The Public School Superintendents’ Association of Maryland (PSSAM), on behalf of all twenty-four public school superintendents, supports House Bill 352 with two amendments to remove the cost shift of more teacher pension costs to local governments, and remove the proposed increase of the local cost share for the placement of nonpublic students.
First, PSSSAM opposes the teacher pension cost shift provision of the bill.
As proposed, this provision would shift approximately $93 million in state teacher pension costs onto counties beginning in FY ‘26, and permanently transfer an increased percentage of the unfunded liability of teacher pension indefinitely.
The Budget Reconciliation and Financing Act (BRFA) seeks to permanently transfer additional teacher pension costs to counties. There is also a recommendation from the Department of Legislative Services (DLS) that would more than double the initial shift, increasing the county burden to $186 million in FY ‘26. If both the BRFA and the DLS recommendations were approved, this proposal would require counties to assume 100% of the State’s unfunded teacher pension liability—an unprecedented and unsustainable financial obligation.
Counties already fully cover the employer share of teacher pensions, or “normal costs” — a responsibility imposed in 2012 after extensive negotiations. These negotiations recognized that county governments have little control over teacher salaries. More importantly, the 2012 negotiations recognized that counties have no control or ability to impact the pension investment returns, or the policies driving these liabilities. As a result, the State would continue to contribute the “unfunded liability,” of pension costs. This proposal, however, would require counties to shoulder the entire cost. Unfunded liabilities primarily result from underperforming pension investments - again, something that local governments and local school systems have no control over. The recent normal cost increases are salary-driven - linked to the Blueprint for Maryland’s Future — factors outside of the authority of counties and school systems.
DLS staff has proposed a 100% cost shift without justification or policy analysis—a move with severe fiscal consequences. If approved, this shift is an unprecedented policy shift that will affect the local negotiations between school systems and their county funding partner. If this change is adopted, it is expected that any requests from local school systems over traditional "Maintenance of Effort,” will be met with serious resistance due to this additional fiscal responsibility.
To compound the fiscal burden, the BRFA also proposes slashing supplemental retirement grants under Aid to Civil Divisions by 50% in FY ‘26 and eliminating them entirely in FY ‘27. These grants were part of a 2012 agreement to ease the impact of the original pension cost shift, and their elimination would break that commitment—resulting in a $28 million statewide loss over two years and compounding the financial burden on counties.
Second, PSSAM opposes the proposed nonpublic special education placement cost shift provision of HB 352.
This provision proposes shifting $25 million in new costs onto local school systems in FY ‘26 and permanently changes the cost-sharing relationship, lowering the State’s contribution from 70% to 60% for nonpublic placements. This shift will immediately affect school system budgets, starting in July, many of which were recently adopted and awaiting their local governments’ response. Similar to the pension shift discussion above, this proposal will materially change the funding relationship between school systems and their local governments. As school districts have no ability to raise revenue, we will have no option but to seek additional funding to cover this cost shift. Costs for nonpublic placements are not discretionary, these are necessary and federally mandated expenses for our most vulnerable special education students.
School systems already suffer from underfunding for special education students. Local school systems spend over $1,038,848,168 in direct special education services that are NOT reimbursed by the state and federal governments (see linked chart).
These BRFA provisions worsen a growing financial crisis facing our local government partners. For these reasons, PSSAM supports House Bill 352 with two key amendments: one to remove the cost shift of more teacher pension costs to local governments, and another to remove the proposed increase of the local cost share for the placement of nonpublic students. PSSAM respectfully requests a favorable with amendments report from the committees.