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How Michigan Can Fix Its Pension Problems
Capitol Confidential ^ | 5/1/2014 | Jarrett Skorup

Posted on 05/05/2014 6:34:51 AM PDT by MichCapCon

LANSING — There are an estimated $730 billion to $4 trillion in unfunded pension liabilities across the states. These costs are crowding out services, harming communities, and causing public employees to worry that governments cannot keep their promises.

It’s time to do something about that before it gets too late, said former Utah State Sen. Dan Liljenquist at an event on Wednesday.

Liljenquist helped usher through reforms in Utah that shifted public employees to a 401(k)-type plan and was named public official of the year in 2011 by Governing Magazine. He spoke at an Issues & Ideas forum hosted by the Mackinac Center for Public Policy titled, “How States Are Fixing Pension Problems – And Michigan Can Too.”

Michigan is almost unique around the country because the state began shifting new employees off of a pension plan in 1997 under former Gov. John Engler, Liljenquist said. This has saved up to $4 billion and is something he said Michigan “has not gotten enough credit for.”

But there are pension systems for teachers and many local municipal workers. The teacher system has an unfunded liability of $24.3 billion while some municipal and counties are worse than the City of Detroit. Liljenquist said the state should move toward generous 401(k), defined contribution plans in order to provide “true retirement security.”

He pointed to Utah as a lesson.

“For 50 years, Utah made every payment, did everything right — we were 100 percent funded going into the economic downturn,” Liljenquist said. “But in 2008, one year of market losses blew a 30 percent hole in our pension fund.”

That would have required 10 percent of the state budget for 20 years to pay off those losses. Instead, Utah moved to a defined contribution-style system to prevent the loss of future services and, potentially, dollars going to retirees.

Shifting employees capped the liabilities and allowed Utah to move forward.

“If you have an oil spill, what do you do?” Liljenquist asked. “First, you cap the spill. Then, you clean up the mess.”

Utah called its bill the “Wage Liberation Act” because freeing up money from the pension system allowed for salary increases and investments into important government services. Pension funding is crowding those things out in many places.

Like in Michigan, where money to retirement systems has squeezed taxpayers and public entities.

“There is an argument that Gov. Snyder has not spent more on education; he absolutely has,” Liljenquist said. “But a lot of that money has gone to the pension system — if that is not an argument for reform, I don’t know what is.”

He added that the governor and Legislature have done “fantastic work” the past few years by tackling liabilities and capping Other Post-Employment Benefits (OPEB). But the state should close the teacher pension system and work to help locals do the same.

Liljenquist said moving employees to a 401(k)-style system is the most sustainable reform because it helps prevent future elected officials from backtracking. In Michigan, over the past decade, the state rarely met its minimum pension payments. And under a deal struck by former Gov. Jennifer Granholm, the state raided the pension funds to bail out a failed movie studio, among other deals.

Getting retirement funds out of the hands of politicians is the best way to protect workers and taxpayers, Liljenquist said. He also believes people should direct criticisms toward elected officials — not government employees.

“If someone offered me a good deal, I would take it,” Liljenquist said. “Sometimes we vilify people for taking a good deal the legislature offered. If you can’t meet that commitment, don’t offer it!”

Politicians underfunding the system to pay for projects now at the expense of future retirees is the real problem.

“Our goal as legislators should be to think 30 years out,” he said. “Not just the next election.”

Liljenquist said states like Kansas, Kentucky, Oklahoma and Rhode Island are all making major changes or have done so in recent years. At the other side of the spectrum is Illinois, which has seen its estimated unfunded liability skyrocket to $200 billion.

Fixing these plans will require hard, mostly unappreciated work – but it is worth it, he said.

“The states that refuse to make the move to defined-contribution plans will languish behind those that do,” Liljenquist said. “Reality is not negotiable.”

TOPICS: Government
KEYWORDS: pensions

1 posted on 05/05/2014 6:34:51 AM PDT by MichCapCon
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Privatize Privatize Privatize

2 posted on 05/05/2014 6:40:24 AM PDT by cripplecreek (Remember the River Raisin.)
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To: MichCapCon

Ground glass in the retirement cake?

3 posted on 05/05/2014 6:50:49 AM PDT by dangerdoc
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To: All
Mmmmmmm....probably would work except cities and states have too many greedy govt employees salivating over pension/disabilty payouts this creep.

Seems a conniving former cop in a NJ city is making another attempt to get a hefty state disability pension even though the dumbo's first attempt cost him his job.

BACKSTORY In 2010, the conniving policeman dreamed up a perfect plan: While he was alone on the job---on patrol---his wife would drive up in a dark van, shoot him in the leg, then escape----to be described as an "unknown assailant"

B/c if the conniving greedster cop were injured "in the line of duty," he could retire on disability, with a tax-free pension of about $50,000 a year, for the rest of his life.

Alas, when the Mrs fired, she missed her husband and shot-up his pants leg instead. Not to be deterred, the conniver-cop reported the "shooting" over police radio.....but an astute plainclothes officer, who happened to be nearby, figured it out and nabbed the Mrs.

The jig was up. The law came down.

The county prosecutor made a deal the cop couldn’t refuse: one count of disorderly conduct, a year of probation, $158 in fines and court costs and loss of his police job of 17 years......

His one consolation was having a souvenir of the "shooting"....a pair of unusable pants.

BELIEVE IT OR NOT Now, he's going for a disability claim, again, that he allegedly suffered two years before his sharpshooting wife hit his pants leg.

So? If he had suffered a disability in 2008, why did he set up the shady 2010 shooting scheme w/ his wife?


MORAL OF THE STORY Govt employees must law awake nights dreaming up ways to cash in on the backs of the taxpayers.

There have been reported cases of cops on the job also collecting disability.

And "retired" cops collecting munificent pensions, working in other states.

In NJ, it was found at least 10 officials are collecting both a public pension and a public salary.

Another case involved a cop retiring, collecting a pension, but holding the same job he retired from.

4 posted on 05/05/2014 7:10:46 AM PDT by Liz
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To: MichCapCon

Dan Liljenquist is a class act. He was elected to the Utah state senate in 2008. By 2010 he had guided legislation that solved the Utah state employees’ underfunded pension problems by moving the state’s employees to a 401K plan, eliminated “double dipping” AND ELIMINATED PENSIONS FOR LEGISLATORS.

In 2011 he sponsored legislation (which passed unanimously) that reformed Utah Medicaid by switching from a fee-for-service model to a managed care system and made Utah the first state in the US to cap Medicaid growth.

At the end of 2011 he resigned from the Utah state senate (what a rare classy move that is) in order to challenge sitting US Senator Orin Hatch in 2012. He didn’t succeed in unseating the well-funded incumbent Hatch unfortunately.

He would have been (and may in the future) a fantastic addition to the US Senate and a needed reinforcement to the true conservatives in the Senate.

5 posted on 05/05/2014 3:53:00 PM PDT by House Atreides
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