By Adam Pagnucco.
Note: There is an update to this post at the end.
The Fraternal Order of Police (FOP) Lodge 35, which represents county police officers, has written the county council in opposition to its plan to use retiree health care money (OPEB) to fund MCPS. The FOP’s position is understandable given that its retired members depend on the OPEB fund to help them afford health care. However, the FOP is also alleging that the diversion of OPEB money may be illegal and could cause the fund to lose its tax status.
I have no opinion on the merits of the allegation, which will surely be evaluated by county attorneys. But this throws a curveball at the council’s plan to fund MCPS without tax increases. The union’s letter is reprinted below.
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May 14, 2025
Kate Stewart, President
Montgomery County Council
Council Office Building
100 Maryland Ave.
Rockville, MD 20850
Dear President Stewart,
I am writing to express my strong opposition to the latest budget item, where the Council voted to withdraw $50 million from the Consolidated Retiree Health Care Trust (Trust). Retiree health care is a guaranteed benefit that the county has committed to paying its employees. As the trust is comingled money from the county government, MCPS, and Montgomery College, this proposal will impact all participants and their beneficiaries. While I understand the Council faces fiscal challenges, using Trust money is not a viable solution.
This action appears to be in violation of the law, as Trust money is only to be used for paying retiree health care benefits. If these funds are used for any other purpose, the Trust could lose its tax status with the IRS – potentially resulting in the dissolution of the Trust in its entirety. To date, the Council has not publicly clearly delineated how the $50 million would be allocated or used.
In December 2023, the Council adopted Resolution 20-337, setting a goal to reach a 75% funding ratio within 15 years. Withdrawing $50 million, under the state of the current market conditions, makes this target nearly impossible to achieve under the Trust’s current portfolio and assumed rate of return. The decision to withdraw the money places a heavier financial burden on future County budgets and will force the County to contribute more money to the Trust by either raising revenues on taxpayers or making budget cuts.
I not only urge the Council to reconsider the vote of this budget item, but I would ask for transparency in how the money will be used and seek alternative solutions that do not compromise the Trust and the retiree healthcare plan participants and beneficiaries.
Respectfully,
Lee Holland, President
Cc: All County Councilmembers
UPDATE, 5/15/2025
One day after sending this letter, the FOP has apparently changed its mind. President Lee Holland has written back to the council stating:
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Dear President Stewart,
I am writing to follow up on my letter dated May 14, 2025, in which I expressed opposition to a budget line item that appeared to involve withdrawing $50 million from the Consolidated Retiree Healthcare Trust (Trust) in efforts to fund the FY26 MCPS budget.
After speaking with you, and other members of the Montgomery County Council, I now understand that what is being advertised as a “withdrawal” from the Trust is inaccurate. What is expected to occur is that MCPS will forgo prefunding the Trust this year and will instead reallocate those funds to support employee benefit in their FY25 and FY26 budget. This decision does not impact the Trust’s current portfolio.
It is reassuring to hear that Council members share the same commitment to protecting the Trust and ensuring the long-term stability of retiree healthcare funding.
