Evans offers 'recovery plan' to save $230M over 4 years
Detroit — Battle lines were drawn Monday as Wayne County Executive Warren Evans rolled out a "recovery plan" to fix the county's finances by cutting $230 million over four years — a proposal a key union leader called "essentially a nonstarter."
Evans' package includes pay and benefit cuts for current employees; the end of health care coverage for future retirees; and a restructured pension system. He called the plan "strong medicine" that's needed to cure an annual structural deficit of $70 million and a pension fund that's funded at less than 50 percent.
"I know it's a tough pill to swallow," Evans said. "But it's a tough pill for all of us to swallow."
Without action, the county executive warned, Wayne County will run out of money by August 2016. He announced his plan at a news conference after briefing union leaders and other county elected officials.
■A 5 percent wage cut for most union and nonunion county workers. Police officers, prosecutors and nurses would be exempt.
■Changing labor agreements to allow work performed by county employees to be outsourced.
■Cutting health care benefits for employees and retirees. Workers who retired before 2007 would be offered stipends to get health care.
■Restructuring the county's pension system, including cuts in future benefits and raising the minimum retirement age to 62. Currently, employees can retire at age 50 with 25 years of service, or 60 with five years of service.
"... The county is in a very dire financial situation," Evans said Monday. "(The plan), in my opinion, represents the most equitable and efficient attempt to eliminate the county's deficit."
But Al Garrett, president of AFSCME Council 25, said the plan leaves out possible sources of new revenue, such as a millage request, and unfairly exempts employees of the sheriff's office and prosecutor's office from cutbacks.
"He's taken two departments and held them safe from pay cuts," Garrett said. "The irony is those are the two departments that have been run over budget for years. They help create the problem and they get a pass. That's basically a no-no from the get-go."
He also said he wished AFSCME had been asked for its input while Evans developed the plan, instead of being presented with it and then asked for suggestions.
However, Garrett said the union raised a couple of ideas Monday during its briefing with Evans and officials "seemed to be interested in them."
The county executive's office said the proposal, as a whole, doesn't need to be approved by the Wayne County Commission.
However, there are parts, such as those related to collective bargaining agreements, that will require board approval. Those provisions could go to the board within a few weeks, depending on whether the county's unions accept the plan, officials said.
"This is our best proposal," Evans said. "I understand some people won't like it."
The county executive said benefit changes, in particular, are painful but necessary. Wayne County's pension fund is less than 50 percent funded and needs $910 million to become fully funded, Evans said. Since 2008, property tax revenues have dropped $100 million annually.
"Health care costs have to be significantly reduced for employees and retirees," Evans said. "For example, we have to eliminate health care for future retirees. And we're going to have to move to high-deductible plans for employees and some retirees."
For the past six years, Wayne County has transferred millions of dollars from the county treasurer's delinquent tax revolving fund to bolster the general fund. In 2014 and 2015, respectively, $91.6 million and $78.9 million was moved from the delinquent tax fund to the general fund, covering the county's operating deficit for both years.
Without the cash from the delinquent tax fund, which is dwindling, Wayne County has a structural deficit that has averaged nearly $52 million each of the last four years, Evans said. Adding to the deficit, the county has taken about $20 million from its general fund each year to help bolster its pension system.
But with the measures in his recovery plan, Evans projects annual general fund surpluses totaling $36.8 million from 2016-19.
Since taking office in January, Evans has unveiled a series of initiatives aimed at shrinking the deficit, including the consolidation of three departments and a division, and a countywide spending and hiring freeze. Those measures are part of the recovery plan, he said Monday.
Last week, Garrett said the county offered AFSCME Council 25 a four-year contract with the 5 percent wage cut, the elimination of vision coverage and an increase in employee contributions for health care insurance.
He also said the union plans to file an unfair labor practice charge against Evans over the proposed wage and benefit cuts.
Garrett said county workers have already taken 20 percent wage cuts and furloughs, and gone six years without raises.
Evans said the county doesn't have time to wait and must act to address its financial challenges. Either the county fixes its finances now, or they'll get fixed by an emergency manager, he said.
He believes his plan will "absolutely" prevent bankruptcy. "Even though in some areas we are worse off than Detroit was pre-bankruptcy, we get rid of the structural deficit, we can do this without bankruptcy," Evans said.