|
|
|
|
|
Collective bargaining is doing serious damage to local governments across Michigan September 25, 2025
Lansing began falling behind in funding pensions for its retirees in 2002. In 2001, we had a $8,977,000 surplus, but a $1,080,000 shortfall in 2002. It jumped another $10,000,000 in 2003, followed by even larger increases in the following years. Here is the history going back to 2001. It is for the Police & Fire and Employees Retirement System combined:
The above is for pensions only; until 2018, retiree health care was "pay as you go" for many local governments, not pre-funded like pensions.
Now, with retiree health care included, the funding shortfall is over a half BILLION dollars. The exact figure is $574,539,378 and it comes from the City's annual report to the state Treasury's Municipal Stability Board. There are 51,129 households in Lansing, so $574,539,378 comes to $11,237 per household.
The most recent annual payment on the shortfall - which the actuary calls the "amortization of the unfunded liability" - was $45,344,116. Details here. Lansing is not the only Michigan municipality with pension debt. The State of Michigan appropriated $750 million for fiscal year 2022-23 to help municipalities get their pension funding ratios up to 60%. It was called the Protecting MI Pension Grant Program. 126 municipalities received grants - cities, villages, townships, road commissions. Here is a list of them. At 60%, they still have a long way to go to be fully funded. And many, like Lansing, are also behind on retiree health care funding.
While the state offered some financial assistance, it did not offer a solution - or attempt to identify the cause of all this pension debt. Doing so would be embarrassing, because the cause is collective bargaining, and it was the state who forced collective bargaining on local governments. As amended in 1965, the Public Employment Relations Act requires public schools and local governments to bargain collectively with employee unions. It didn't take long for unions to discover that retirement benefits were easier to sell than salary increases, partly because it was difficult to estimate the cost and partly because those costs seemed far down the road.
Because Lansing's leadership was mostly union-friendly Democrats, the labor negotiators weren't particularly hard bargainers. For the current Schor administration, chief labor negotiator Dennis Parker is president of UAW Local 2256. It also doesn't help that candidates love to claim union endorsements:
From early on, retirement benefits for City of Lansing employees were very generous. Police and fire fighters could retire at any age with 25 years of service. (In 2011, there was a push to lower the service requirement to 20 years!)The benefit multiplier was 3.2% (compared to 1.5% for state employees). The final average compensation period was a short 2 years. When a retiree died, the spouse could receive half the benefit and there was no reduction in the initial benefit to pay for it.
Police and firefighters liked to justify these rich benefits by pointing out that they didn't participate in the Social Security system. But they also didn't pay in to the system, and neither did their employer .
Reducing promised benefits was not an option. Article IX, Section 24 of the Michigan Constitution says
Benefits could be reduced for new employees only. Several changes were made for new police and firefighters in 2014, including:
When decreases in long term obligations happen only when new employees replace retiring employees, the process is slow going. And recruitment is difficult when prospective employees realize that their retirement benefits don't measure up to those of employees already on the job. Retirement benefits are a form of compensation, so with the same salary as existing employees, new employees are getting shorted.
My solution would be to eliminate retirement benefits for new employees - no pension, no retiree health coverage. We'd have to pay them a lot more than we pay for current employees. An actuary could tell us how much the City sets aside now for those future benefits, and adding that amount to the current starting salary would give us a reasonable salary for a new employee without retirement benefits. But rather than arriving at it that way, I would simply pay them the market rate - the minimum amount needed to attract qualified candidates. And we'd have to enroll them in the Social Security program.
With higher salaries and no retirement benefits to look forward to, employees would stay on the job longer. And they wouldn't have to mow lawns to make ends meet. Even former Lansing police chief Ellery Sosebee had his own mowing business. (Lansing State Journal, 8/15/2025)
It may seem cruel to not offer retirement benefits, but a lot of the Lansing residents who are stuck with the payments on the City's $574,539,378 in unfunded pension and retiree healthcare liability don't have employer-provided pensions and health care, either.
Send comments, questions, and tips to stevenrharry@gmail.com or call or text me at 517-730-2638. If you'd like to be notified by email when I post a new story, let me know.
|
