Column: Act now to fix pension system
We cannot have a strong, healthy Michigan unless our local communities are strong and healthy.
Unfortunately, debt related to local government employee retirement systems is a cancer eating away at Michigan communities. Debt contributed mightily to Detroit’s bankruptcy in 2013 and these same conditions are seen in many of our communities.
About half of Michigan’s roughly 1,800 local units of government offer a pension or health care post-retirement benefit. These range from cities and counties to road commissions and local libraries.
Michigan’s local governments have an estimated collective pension and retiree health care debt of nearly $20 billion. This takes money away from police and fire departments, road repairs and other essential public services we all depend on. It puts at risk the benefits public employees were promised for their retirement. It threatens to burden our children and grandchildren with debt they did not create.
These benefits are not simply numbers in a report or spreadsheet. These benefits are earned through the hard work of police officers, firefighters and other members of our communities. Reform is needed to ensure our great public servants receive the benefits they were promised.
I recently introduced the “Protecting Local Government Retirement and Benefits Act” in the Michigan House of Representatives. The main purpose of this bill is to improve the solvency of pension and retiree health care plans throughout Michigan.
The bill requires local governments to begin saving for retiree health care, establishes standards retirement plans must follow, creates a fiscal impact evaluation system to determine plans that are at risk and, most importantly, requires broken plans to be fixed over time. Local communities in financial trouble will have every opportunity to set their own plans straight, but if they fail, a state-appointed financial management team will take action.
Pension benefits are constitutionally protected and local units are obligated to pay them. However, retiree health care benefits are not, and if a local unit goes into bankruptcy those benefits are at great risk of being cut.
We must act now to fix these systems, or the problems will get worse and more widespread. Compound interest is an amazing force and, in the world of unfunded liabilities, it can work against you as equally strong as it can work for you. Waiting to fix problems will result in liabilities becoming insurmountable, and eventually beneficiaries will lose benefits.
Governments in general have a poor track record when it comes to funding long-term obligations. It’s time to stop planning just a year or two ahead and start making decisions to build a better future here in Michigan.
Rep. Thomas Albert, R-Lowell, represents Michigan’s 86th district in the House of Representatives.