Posted on 09/30/2016 8:20:39 AM PDT by MichCapCon
Michigan should transition all retirement and health care benefits for government employees to 401(k)-style benefits that are common in the private sector. That was the consensus of the West Michigan Policy Forum, which held its fifth conference in Grand Rapids on Monday.
“The status quo is unacceptable and unsustainable and we have a stewardship obligation to leave things better off in the future and you can’t do that unless you deal with these issues,” said David Walker, former comptroller general of the United States and former head of the U.S. Government Accountability Office.
Walker unveiled a study commissioned by the policy forum of employee retirement obligations of seven Michigan municipalities: Ann Arbor, Grand Rapids, Grand Traverse County, Kalamazoo, Lincoln Park, Port Huron and Saginaw.
The total unfunded liabilities for these seven municipalities came to $2.3 billion. All but Ann Arbor have taken steps to modify their defined benefit pension plans. Walker warned, though, that retiree health care costs are an even bigger problem, taking a larger and larger chunk of government revenue.
The Michigan Constitution places a limit on how much a municipality can collect in property taxes. That means a city with an unfunded liability must take other steps. These include raising other taxes or cutting services, typically infrastructure and public safety.
Municipalities can collect income tax, and three of the seven in the study now do so. If they close their defined benefit pension system to newly hired employees, they can also finance their unfunded retirement obligations by issuing bonds. But that path creates debt to pay off debt. All of the municipalities have more retirees than active workers.
“By the time an employee retires, you should have funded all of their benefits, because they’re not going to give you any more service,” said Walker. He blames politicians, not workers or retirees, for the underfunding.
“Typically, what happens in the public sector is they hold the line on cash pay; they promise the sun, moon and stars on retirement benefits; they don’t fund them and then we have this ticking time bomb,” said Walker.
Unlike the federal government, states and cities can't cover their obligations by printing money. And if their tax burden becomes too high, he added, taxpayers can move out of state.
“The status quo is unacceptable and unsustainable,” said Walker. “We have a stewardship obligation to leave things better off in the future and you can’t do that unless you deal with these issues.”
After the presentation, a panel of public and private executives discussed possible solutions. The participants included Tom Menzel, the county administrator of Grand Traverse County; James Freed, the Port Huron city manager; Nick Ciaramitaro, legislative director for Michigan AFSCME Council 25; John Kennedy, president and CEO of Autocam Medical; and Doug Roberts, former Michigan treasurer.
All agreed reform was needed. They discussed the merits of closing pension systems to new employees, formulating retiree health care benefits with exchanges under the Affordable Care Act and eliminating pension abuses such as pension spiking.
All the people who retired with a 401K in my neighborhood are so much better off then those with a pension. Ok sure getting 2 thousand a month is nice until the AC/heating system goes out. My neighbors with 401K have much more flexibility.
All those ‘public service’ and government employees drawing fat 5 and 6 figure paychecks from the taxpayers should have been funding their own retirement. Instead they expect us to pay them huge benefits? Surprise, we got nothing for you moochers, as we barely have anything for ourselves. Dry up and blow away...
The Feds will federalize the pension funds ... just you wait.
Unfortunately, the government believes the country is full of idiots with regards to investing and budgeting (probably right about that), so they feel they should be able to control the contents of all individual retirement accounts because they know better than the sheeple (absolutely wrong about that).
401Ks are tied to the markets, which are currently high, but it is all a house of cards. “Overinflated” is too kind a word. And if Deutsch Bank explodes, watch the shrapnel take out everything else.
That is precisely the plan.
Well, you've certainly changed your tune from a few years ago. Then, you were crowing about how wise you were to go into government work because of the pension.
I would appreciate it if you didn’t call me a moocher just because 60 years ago, when I was a wee child skinning my knee, some politicians decoded they wanted a statewide pension for police and firefighters in my state.
They apparently had trouble getting professional FF and police in small towns and cities without a pension plan.
So they forced the big cities to join with the state and created a statewide FF and police pension fund.
Then 40 years ago the same politician class realized they gave too great of benefits and created a new plan that covered new employees...which does not cover health care during retirement (the plan I am under.)
I pay into my pension as does the state and city.
It is nothing like CA’s crazy system which is why it is a fully funded public sector pension plan.
So please keep the angry genralities to a minimum....I would have been happy to have a 401K but those who were in charge decades ago decided for me what I would be allowed to have.
Of course they’ll have to take over 401Ks too ... Granted I’ve been saying that for years. The “progressives” will decide that it was always improper to defer income taxes and will confiscate interest earn and back-taxes “owed”.
This is why I’ve been saying Roth IRAs should be preferred ... that way they won’t take your principal so easily.
Pardon, didn’t mean to step on your toes. what got me going is that I’ve read about all those fat pensions city/gov employees get. Let ‘em live on my puny little retirement...they’d cry like babies! ;)
This household has a mix....403B for the wife, pension fund from working in grocery stores (Talking about a few hundred a month) and public pension as a LEO for me...and savings/investment.
It just bothers me when people read about Mchigan or California public pension plans and then go of in our local media (not you of course) and go off as if the same is true for WA state.
We have been very responsible because we use a 3rd party to manage the investments of the fund, do not add benefits that cannot be paid for out of the existing fund, and fight tooth and nail the politicians who try to raid our fund every year to fix all the stuff they have screwed up elsewhere.
“Typically, what happens in the public sector is they hold the line on cash pay; they promise the sun, moon and stars on retirement benefits; they don’t fund them and then we have this ticking time bomb,” said Walker.
Stop promising the sun, moon and stars.
Well I still believe in freedom to choose your job. However I have a bunch of retireees (a few helping me with my portfolio) who have done very well 3.8 million between husband and wife with no pensions. And they were blue collar workers.
Nice to see it done right. Rotten scumbag politicians trying to steal your dough, you’d think they’d learn, but they’ll never stop trying, no doubt. Gotta watch ‘em!
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