City, school auditors differ over pension liability issue

Two Baltimore auditors are locked in a dispute over who is responsible for a $100 million unfunded pension liability for city school employees.

City auditor Robert McCarty said the issue was brought to light by a review of the city’s 2015 finances. City officials are convinced that the responsibility for the pension shortfall lies with the Baltimore City Public School system. Not so, says the schools’ auditor. The school system had not been including the amount in its financial statements.

“We believe the liability belongs with the city and we are protected,” said John Walker, the chief financial officer for city schools. “Obviously the city disagrees with us. At some point in time, we are going to have to sit down and hash this out.”

The school district makes annual payments for its employees covered by the city pension system, but has not previously taken on the unfunded liability, which is the gap between the funds in the pension account and the amount owed to retirees.

Central office employees, cafeteria workers and custodians participate in the city pension system, while teachers and principals are in the state system.

If it’s determined the school district is responsible, school officials would turn to their savings fund to cover the liability.

After McCarty revealed the problem to the Board of Estimates on Wednesday, City Council President Bernard C. “Jack” Young said he was concerned about the finding.

He planned to hold a hearing to get more information.

Mayor Catherine Pugh said she would review the auditor’s findings.

The system faced a $130 million gap in its operating budget for the coming year. Some of that was plugged with aid from the city and the state, but more than 100 school employees had to be laid off.