The MD House Rules & Executive Nominations Committee Should Vote “Favorable” on House Bill 1335

HB 1335 should receive a favorable report out of the Committee, to reinstate the earned prescription benefit for Medicare-eligible retirees hired before July 1, 2011.

(Introduced 2/11/2021, HB 1335 is the 2021 version of last year’s HB 1230.)

The preliminary injunction in the ongoing court case (Fitch, et al v. State of Maryland, et al) does not preclude the General Assembly from remedying the State’s attempt to breach its promise of prescription drug benefits to its Medicare-eligible retirees. The injunction only stops the State from ending the promised prescription drug benefit — or from substituting the provisions of 2019’s SB946 — until the litigation reaches a conclusion.

The September 2018 injunction was imposed by Maryland US District Court Senior Court Judge Peter J. Messitte because he found:

• that it was in the public interest, when, in this kind of situation, benefits such as prescription drug benefits can be terminated even after employees have met all the creditable service requirements to participate in the Health Program; and that there was sufficient showing by the Plaintiffs that a contract existed, and
• that the Plaintiffs may prevail on the merits regarding a breach of contract claim based not only on the language of the statute but also by common law principles of contract.

Please consider:

The issues of retirees’ benefits, the State’s unfunded Other Post Employment Benefit (OPEB) liability, and Maryland’s bond rating should not be conflated.

1. The rating agencies have never downgraded a state’s bonds based solely on an unfunded OPEB liability; and

2. States with greater OPEB liabilities than Maryland have continued to maintain their triple-A bond ratings.

The principal and substantial cause of the unfunded OPEB liability is the State’s own consistent failure to make the appropriate contributions to its OPEB Trust fund. The inescapable conclusion is that it has been the lack of State funding of the OPEB Trust that has led to the current unfunded liability. Then the State used the unfunded liability that it created as the rationale for removing retirees from their prescription drug plan, the plan that they were promised and to which they have contributed for 20, 30, 40 years and more. Please also remember that approximately 40% of the cost of the retirees prescription drug program is paid for by the retirees plus federal reimbursements to the State.

Retirees saved and built their retirement plans on the basis of what they were told by the State. The State then moved to deprive them of what is basically a type of deferred compensation — earned but not yet claimed. Of course retirees remain more than concerned: they are outraged. And afraid.

And, no, the various prescription drug programs created by 2019’s Senate Bill 946 are not demonstrably comparable.

Of particular note: the oft-cited GASB made its position on funding OPEB liabilities exceedingly clear:

“… the GASB believes that a government has an obligation to pay OPEB based on the level of retirement benefits promised to an employee in exchange for his or her services.”

This is what retirees had a right to expect. The State did not tell them otherwise. In compliance with GASB principles and in fairness to the tens of thousands of state retirees, the State should move to keep retirees in the current retiree prescription drug program.

There is no question that the right and moral thing to do is to reinstate retirees’ prescription drug. I urge the House Rules & Executive Appointments Committee to start the process by giving HB 1335 a “favorable” report.