Recent stories coming out of Lansing indicate lobbying groups are planning to camp out in Lansing to rally against potential solutions to fund local government’s retirement promises. As we head into the holiday season, it’s a good time for us to reflect on the promises that we make — and how they must be kept.
At issue is the fact an overwhelming majority of Michigan communities haven’t fully funded the promises they have made to their hardworking police, fire and other municipal employees. These same communities are failing to be transparent on the magnitude of the unfunded promises that have put their employee retirements at risk.
As state taxpayers, we already have made this mistake once in Detroit, where through bankruptcy, employee pension and retiree health care needed to be cut by billions of dollars. Some 90 percent of retiree health care benefits were slashed. These employees worked hard and followed the rules, but because their benefits weren’t funded, they lost what they were promised.
We must make changes so current and future workers and retirees are protected in every Michigan community. While each community may need to employ a unique solution when it comes to supporting the retirement and health care benefits for their local employees, our state, however, must have one consistent set of rules.
These reforms are long overdue. The West Michigan Policy Forum urges the legislature to act before the end of the year and pass legislation that includes guidelines designed to protect the pensions people have earned. We need the legislature to outline solutions that include the following requirements:
Transparency on numbers so we understand the liability in each community.
Pre-funding retiree income and retiree health care using realistic assumptions like medical inflation on health care and realistic investment income rates on pensions.
Ensure communities move to defined-contribution plans if their benefits are underfunded.
Guidelines that address how the state will contain and resolve insolvent communities.
Protections so these changes cannot be gamed or ignored in the future.
For many Michigan cities, roughly 20 cents on every dollar will go to fund past promises to employees no longer working for taxpayers. This already is impacting what we can and should use to invest in police, fire, ambulance services, sanitation, parks, etc.
Michigan communities have worked hard to recruit and retain some of the best police, fire and municipal employees in the nation. Now, we owe it to them to keep the promises we have made. All elected officials and employee representatives must work together to ensure financial stability for our communities and safeguard the effective delivery of local government services.
The goal should be to have this fixed by year-end. The issue can no longer be pushed down the road to burden our children and grandchildren.
John Kennedy is chairman of the West Michigan Policy Forum.