DALLAS -- Michigan Gov. Rick Snyder has formed a task force charged with recommending how to tackle local governments' unfunded retirement obligations.
The group is made up of more than 20 members who represent labor and management, investment managers, insurance and finance professionals, and legislators. The group is expected to report back to Snyder with recommendations on reforming pension and retiree health care by the spring.
"My goal for this task force is to have collaboration among legislators, state and local government officials, and employee representatives to ensure the financial stability and effective delivery of local government services for the coming decades," Snyder said in a press release. "As we discuss this growing financial problem across the state it is imperative that we also keep retirees in mind who rely on these programs."
The push comes as state lawmakers are looking at how to help local governments address $14 billion in unfunded liabilities in municipal pension and retiree health care plans across more than 330 communities.
Michigan House Republicans introduced a 12-bill retiree healthcare reform package last year but it stalled during the December lame duck session. The legislation was aimed, supporters said, at reining in unfunded liabilities in communities that have extended more benefits to employees than they can afford.
The bills sought to impose restrictions on local governments with retiree health costs funding levels that are below, or fall below, 80%.
New employees hired after April 30, 2017 would have been excluded from retiree health care coverage. Instead, a local unit of government would have been permitted to contribute up to 2% of an employee's pay to a tax-deferred Health Savings Account that could be used at retirement.
Voting was postponed until this year on a Senate proposal, which would close the state's teacher pension system to all new hires and instead offer them 401(k)-style defined contribution plan.
The House and Senate are expected to pick up their respective legislation in the current session.
State Rep. Thomas Albert, R-Lowell, who will serve on Snyder's Responsible Retirement Reform for Local Government task force, said the outstanding health-care and pension debt local governments face is a problem that has been kicked down the road for far too long.
"Local governments are stretched to their limits financially, and it's starting to have a negative impact on the quality of services municipalities provide to local families," said Albert. "These liabilities make up as much as 13% of a municipality's annual budget. When local leaders have to dedicate that much money to paying down debt it takes funding away from essential services like road repairs and police and fire protection."
Tony Minghine, associate director & chief operating officer of the Michigan Municipal League, will also serve on the task force. In a report released at the end of January, the MML said that local governments in the state are facing growing costs for legacy post-employment health and pension benefit commitments with less funding availability. The report the group released said that cities and villages lost over $7.5 billion in shared revenue since 2002, even as the state's economy prospered.
"We are confident [Snyder] and the members of this important committee share our commitment to fiscal responsibility," said Chris Hackbarth, the league's director of state & federal affairs. "Cities want to be able to provide competitive benefits to their retirees. But in order to provide modern health care benefits, we need modern health care plan designs."
