Evans to veto bump for retirees in Wayne County's $1.6B budget
Wayne County Executive Warren Evans said Thursday he plans to veto a $15 increase to most retirees' monthly health care stipends.
The board of commissioners 13-2 approved Thursday the $1.61 billion budget for fiscal year 2018-19, which begins Oct. 1. It included the amendment to raise former employees' benefits to Evans' proposed budget. The increase would be the first raise in the county's unfunded liabilities in three years and could increase the county's unfunded liabilities by an estimated $5.6 million.
Although some commissioners said the raise would show an appreciation for former county employees as the economy sees significant growth, others expressed concern it is an indication the county is returning to its ways that led to a financial crisis three years ago.
Commissioners Joe Barone and Terry Marecki, both Republicans, voted against the budget because of the stipend increase. Evans, a Democrat, also said he opposes the increase.
"I am going to veto (the raise)," Evans told The Detroit News. "It is something that takes the county in the wrong direction. We have spent four years trying to come from a financial crisis. What type of message does this send?
"This is something we’d all like to do, but it costs us money we don’t have."
The commission could override the veto with 10 votes.
Wayne County Medicare-eligible retirees who receive a pension of $28,000 per year or less would be eligible for the stipend increase. An estimated 3,168 former employees would be eligible. It would cost the county an estimated $540,000 annually. Current stipends range $130-$135.
"That is not going to make or break Wayne County," said Commissioner Diane Webb, D-Livonia, "as much as it means to the people who will be receiving that $15 per month."
The unfunded liabilities in Wayne County's retirement system has been a major financial challenge for the county in recent years. Its pension funding dropped from 95 percent to 45 percent between 2004 and 2013. Despite cuts, Wayne County's pensions are only 54 percent funded.
Unfunded liabilities can affect a county's bond rating, which affects the interest rate at which the county can sell bonds. In June, Moody's Investors Service upgraded Wayne County's bond rating two notches to investment-grade for the first time in four years. Fitch Ratings and Standard & Poor's Financial Services LLC also rate Wayne County investment-grade.
Evans said this is of particular concern since the county is issuing bonds to pay for a new criminal complex center and other projects in the future. Lowering the county's bond rating also could make it more challenging to refinance current bond interest rates.
"This could potentially blow up this good thing we got going," Plymouth's Barone said. "If our credit rating goes down, this decision may not mean just $5.6 million. It may mean $20, $30, $50 million because our bond rating goes down."
Evans said the county also has had challenges hiring and retaining employees, many of whom have not received raises in 10 years. The 2018-19 budget includes a 2.5 percent increase in pay for non-court personnel.
Since the county is financially healthy again, several commissioners said it is time to give back to the former employees who saw their pensions and post-employment benefits slashed.
"We owe them thanks for our finances," Webb said. "The economy turned this county's finances around and the sacrifices of our retirees and employees turned this county around, and if anybody in elected office thinks they deserve credit for that, they are wrong."
Commissioner Glenn Anderson, D-Westland, agreed: "It's not a question of if it's the right thing to do, it is the right thing to do. It is a question of whether or not we value these people who worked for the county as long as they did."
Commissioner Al Haidous, D-Wayne, said he would have liked to see the county increase the stipend more since it does not cover the cost of buying additional healthcare coverage. The commission's committee of the whole reduced the raise from $20 to $15 on Wednesday.
Pat Flannery, a Wayne County sheriff's department retiree, said he does not receive the stipend but attended the commission's meeting Thursday to support his fellow former employees.
"I think it was the right thing to do," the 68-year-old Detroit native said. "Wayne County employees and retirees have been attacked by the county executive. We feel this is a move to give back to those that had to give up what they earned."
In 2015, the county settled a lawsuit filed more than eight years ago with retirees. The deal moved about 5,000 former employees from an employer-paid group health care system to one that gives them a monthly stipend to pay for a plan purchased on the federal Health Insurance Marketplace. At the time, Evans said the move would save the county $20 million per year.
In August 2015, the county entered into a consent agreement with the state after Gov. Rick Snyder confirmed a financial emergency in the county because of deficit spending and unfunded liabilities. About 14 months later, the state released the county from the agreement, after Wayne County made major cuts.
"A decision like this today is a step backward," Livonia's Marecki said. "(Bond rating boards)are going to look at Wayne County and say, 'What are you doing? We can't trust you one year out of having the state overlook your budget to make the same bad decisions that were done in the past.'"
Between 2015 and 2017, Wayne County reduced unfunded pension liabilities from $798 million to $636 million and other post-employment benefits from $1.32 billion to $194 million.
The Wayne County Commission has allocated millions of dollars more to the retirement fund than the county’s legally required amount. The county expects to contribute $81 million above its annual required contribution for pensions prior to Oct. 1. That includes $58 million from the sales of the Downriver and Northeast Sewage Disposal Systems.
In addition to the increased stipend, the 2018-19 budget allocated $14.5 million in debt service to finance the new criminal justice center, $10.5 million for bridge inspections and repair and about $13 million for technology upgrades.