ANNAPOLIS, Md. (AP) — Maryland fiscal officials urged lawmakers Wednesday to reject Gov. Martin O’Malley’s proposal to help fill a budget hole with $100 million intended to shore up pension liabilities.

Comptroller Peter Franchot and Treasurer Nancy Kopp implored members of a Senate panel that steers state spending to find other ways to help address a budget shortfall.

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Kopp, who chairs the state pension system’s board of trustees, was particularly critical of the governor’s proposal to permanently cap money reinvested in the pension system at $200 million, instead of $300 million, to ease pressure on the budget now and in future years.  She said that although the short-term cut does save money to fill budget gaps, a price tag of about $1.75 billion will arise over the period required to reach full funding of the pension system.

“A long-term permanent reduction in the reinvestment of the employees’ contributions and benefit cuts would, in fact, be costly to the employer and the employee, and we urge its fiduciaries not to do it,” Kopp, a Democrat, told the Senate Budget and Taxation Committee.

The O’Malley proposal is a touchy subject because the state overhauled the pension system three years ago by increasing state employee contributions and reducing benefits with an eye toward shoring up funding of the pension system.

Franchot said the governor’s proposal reneges on a commitment to state employees, who agreed to make near-term sacrifices for long-term security of the state’s retirement system.

“Make no mistake, backing away from this commitment undermines our credibility when we ask our citizens to make similar sacrifices to solve budget deficits or provide services and promise to dedicate those funds for specific purposes,” said Franchot, a Democrat.

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Kopp and Franchot both expressed concern about how the change could influence bond-rating agencies, which consistently have given Maryland a top rating.

“If we ever lose it, we’re going to look back on this action as the– well, it’s not crossing the Rubicon, but it’s getting in the boat ready to cross it, and I importune you to reject both the long-term and the short-term transfer of money that should be going to the pension fund into the general fund,” he said.

T. Eloise Foster, the governor’s budget secretary, said the proposal will only postpone getting the state to 80 percent of pension funding — a mark often cited as a sign of a healthy system — from 2024 to 2025. She also said the change won’t affect pension money paid to retirees and making the cap permanent will address projected budget deficits in future years.

“We’re doing this to get our fiscal house in order and to be at a place in time where we won’t continue to have a structural deficit,” Foster told the committee.
Senators questioned what they would do to replace such a large amount of money. Foster said the state would save $175 million under the proposal over fiscal years 2014 and 2015.

“We’ve got to make a decision, and there’s only a couple of alternatives,” said Sen. Edward Kasemeyer, a Baltimore County Democrat who chairs the committee.

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