Gov. Gretchen Whitmer’s 45-cent-a-gallon gas tax hike proposal to fix Michigan’s roads seems to be making some Republicans a little crazy. 

Reports in recent weeks have offered different variations of the same idea: How to leverage the state’s teacher retirement system as a way to find additional funding for roads. 

This concept of either delaying payments on the pension system or borrowing a significant sum to free up money in the short term is leaving many conservatives scratching their heads. 

That’s because these ideas are coming from Republicans, including the West Michigan Policy Forum, a group of (usually) fiscally responsible businessmen. And GOP leaders are considering these plans, although they’ve been reticent to talk about it. 

“This is one of the least West Michigan ideas I’ve ever heard of,” says Anderson Economic Group CEO Patrick Anderson, who is raising the alarm over these proposals. “It’s recklessly avoiding the fact you can’t avoid paying your bills.” 

More: GOP's $1B road repair idea: Pension bonds

Republicans are so ardent in avoiding a painful vote to increase taxes for roads that they are turning to risky alternatives. James Hohman, fiscal policy director at the Mackinac Center, has studied both teacher pensions and road funding, and says lawmakers would be better off making roads a priority “by using the state’s growing revenues” and staying within the budget. 

It’s especially surprising that members of the West Michigan Policy Forum would advocate tinkering with pensions since addressing the state’s heavy burden of unfunded liabilities has been a top priority for the group in recent years.

On its website, the group states as one of three goals: “Continue to push for reform in our state and local governments to address their unfunded liabilities that, if left unchecked, will greatly impact current and future retirees and the next generation.”

Members of the business coalition are absolutely correct. 

That’s why two years ago, GOP lawmakers made important reforms to the Michigan Public School Employees Retirement System. That system has racked up nearly $30 billion in unfunded liabilities, which was consuming greater percentages of schools’ budgets each year. It was unsustainable. 

Thanks to the legislative changes, which moved new teachers into 401(k)-style plans, and additional commitments from the state to pay down the debt, the state is on track to pay off its obligations by 2038 -- if the state stays the course. 

Anderson says delaying payments could be disastrous for the system, as well as for taxpayers. 

“The entire purpose of this scheme is to take money intended to fund pension obligations, and use them for something else, which is contrary to the intention of the Constitution,” states a memo from Anderson’s group, requested by concerned school superintendents in Macomb County. 

Extending debt repayment to 40 years, from the current 21 years, would cost taxpayers an additional $30 billion. 

The other idea of issuing “pension obligation bonds” is equally bad, despite the sunny promises West Michigan Republicans are floating. Taking on such debt is known to be a risk, as returns often don’t meet expected targets, and notable organizations have warned against doing so. The plan would put $10 billion in borrowed money to paying down the unfunded pension liabilities — with the goal of using the “savings” to contribute toward roads

Sounds a little too easy, doesn’t it? 

For instance, the Government Finance Officers Association in 2015 urged state and local governments against using these bonds: “In recent years, local jurisdictions across the country have faced increased financial stress as a result of their reliance on POBs, demonstrating the significant risks associated with these instruments for both small and large governments.”

Both road funding plans should be nonstarters, Anderson says. 

“The principle is the same: You get into debt, while telling yourself you have ‘saved’ money that you can spend,” he says. 

Read or Share this story: