Column: How to tackle retirement costs
The Michigan Municipal League and other local government organizations in the state are sorely disappointed in the failure of the Michigan Legislature to help us address looming retirement benefit costs that threaten the ability to provide vital community services.
The Legislature last week declined to make hard choices, and instead kicked this important can down the road to yet another year. Well-thought out, meaningful proposals to reform Other Post-Employment Benefits (OPEB) were made by local governments. These plans would have given local communities tools for comprehensive reform. The local government proposals would have allowed communities to better manage and afford rising retiree health insurance costs. Instead, in the early hours Thursday morning, the common-sense plans were derailed and stripped down and replaced with a reporting-focused, non-action oriented proposal.
In the past, local governments offered health care insurance to retirees, from police and firefighters to parks maintenance workers and tax collection clerks. Decisions to provide these health care benefits were made before the Michigan Legislature started cutting state taxes and, when tax revenues dropped, revenue sharing to local governments. The state also has restricted the ability of local governments to benefit from rising property tax values by restricting taxable assessment increases. Add in the spiraling costs of health care far above inflation, and you have circumstances nobody could have foreseen.
In addition, state laws don’t provide clear authority for communities to rein in costs on their own. Combine all these factors, and one can see that there is plenty of responsibility to share for the current situation.
The right solution — the one the League, the Michigan Association of Counties, the Michigan Townships Association and others have advocated — is for everyone to act in concert, together.
Local governments know well this is a critical balancing act. We must be able to provide adequate compensation to attract good staff to local public service, whether that be patrolling our city streets, fighting and preventing fires, or enforcing city zoning and building codes. All of those jobs are important. But we also know our ability to continue providing all those vital services are imperiled by rising health care costs of retirees.
So, we are ready, if the Legislature will give us the tools, to make the hard decisions and start paring back health care costs and bring them more in line with the private sector market. Nobody is talking about ending health care for retirees. But there are innovative ways to reduce costs, and put some of the responsibility for paying a share of those costs onto the individuals who are benefiting — just as happens at most companies. State policies restricting our ability to act must be removed.
The League and its members remain committed to developing comprehensive reforms that balance the desire to manage costs while maintaining a quality municipal work force. It can be done. We will continue to advocate for real change. The citizens of Michigan deserve it.
Dan Gilmartin is executive director and CEO of the Michigan Municipal League.