Pen­sion re­form is start

Leg­is­la­ture’s at­tempt at ad­dress­ing pen­sion, re­tiree ben­e­fit short­falls will add trans­parency but not much teeth

The Detroit News - - Front Page -

Gov. Rick Snyder made tack­ling lo­cal pen­sions and re­tiree ben­e­fits a pri­or­ity this year, as most Michi­gan com­mu­ni­ties have not ad­e­quately saved to ful­fill these obli­ga­tions. The Leg­is­la­ture got on board and both cham­bers have passed bills ad­dress­ing re­tiree fund­ing short­falls. The bills aren’t perfect, but they’re a start.

The House and Se­nate on Wed­nes­day passed sim­i­lar pack­ages, but they left out some tougher over­sight pro­vi­sions that had gar­nered crit­i­cisms from lo­cal gov­ern­ment lead­ers Democrats, who feared the sys­tem looked too much emer­gency man­age­ment. Be­cause of that, the bills lost the sup­port of some Repub­li­cans who spon­sored the orig­i­nal bills.

Law­mak­ers will now need to iron out any dif­fer­ences in the pack­age.

The leg­is­la­tion has got­ten a lot of crit­i­cism from unions, in­clud­ing po­lice and fire de­part­ment work­ers who didn’t want to lose any of their ben­e­fits.

Be­cause of the com­pro­mises, there ap­pears to be bi­par­ti­san sup­port. Se­nate Mi­nor­ity Leader Jim Ananich, D-Flint, said the re­vised bills of­fer broader ap­peal to law­mak­ers.

The se­ri­ous prob­lems with Michi­gan’s pen­sions and re­tiree ben­e­fits have been well doc­u­mented. In a re­cent re­port, Business Lead­ers for Michi­gan found that un­funded pen­sion li­a­bil­i­ties and other re­tiree ben­e­fits such as health care were putting the state at a dis­ad­van­tage. The re­port found that Michi­gan ranked 28th in un­funded pub­lic pen­sions and 37th in other non-pen­sion li­a­bil­i­ties. As those costs con­sume more of state and lo­cal bud­gets, other pri­or­i­ties such as ed­u­ca­tion and in­fra­struc­ture are jeop­ar­dized.

In re­sponse to the House and Se­nate ac­tion, Doug Roth­well, pres­i­dent and CEO of BLM stated the leg­is­la­tion was an im­por­tant first step: “We be­lieve the data will show that the prob­lem is se­ri­ous and that ad­di­tional ac­tion will be nec­es­sary to pro­vide sta­bil­ity for our lo­cal gov­ern­ments.”

State Trea­surer Nick Khouri told law­mak­ers that lo­cal gov­ern­ments have only com­mit­ted $3 bil­lion to cover $12 bil­lion in promised ben­e­fits. Some are do­ing bet­ter than oth­ers, but those num­bers aren’t sus­tain­able.

The leg­is­la­tion would re­quire lo­cal gov­ern­ments to re­port more in­for­ma­tion to the state. That trans­parency should help, al­though it’s no guar­an­tee any­thing will change. There is still room for some ex­tra in­volve­ment from the state, in­clud­ing by the Trea­sury De­part­ment, if com­mu­ni­ties don’t meet fund­ing thresh­olds.

James Hohman, di­rec­tor of fis­cal policy for the Mack­inac Cen­ter, doesn’t think the leg­is­la­tion goes far enough, say­ing it’s “based on bad premises,” es­pe­cially when it comes to re­tiree health care. Pen­sions are con­trac­tual rights that need to be funded, he says, but re­tiree health care is a gra­tu­ity that can be re­duced or re­formed at lo­cal dis­cre­tion.

“The state missed an op­por­tu­nity to en­cour­age lo­cal gov­ern­ment man­agers to be prac­ti­cal about pro­vid­ing ben­e­fits that few in the pri­vate sec­tor re­ceive,” Hohman ar­gues. “In­stead of pro­vid­ing that en­cour­age­ment, po­lit­i­cal lead­er­ship sought to fund ben­e­fits that should never have been pro­vided in the first place.”

This was the time for law­mak­ers to make a bolder move on ad­dress­ing these re­tire­ment fund­ing con­cerns. But this plan is bet­ter than noth­ing.

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