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A new law requiring communities to report their underfunded retirement plans is revealing some bad news in Michigan.
The report shows that nearly a quarter of the state’s local government units have underfunded their pensions or retirement health care plans, or both.
CBS Detroit reports on the bad news:
The list includes metro Detroit hubs like Southfield, Berkley, Flint, Centerline, Eastpointe, Mount Clemens, New Baltimore, Romeo, St. Clair Shores, Warren, Hazel Park, Grosse Ile, Hamtramck, Highland Park, Lincoln Park, Grosse Pointe Farms and Grosse Park Woods.
The report is meant to serve as a warning signal that it’s time for cities in distress to work with the state, and their employees, to make sure they deliver what was promised.
“Collaborating with communities to identify underfunded retirement benefits is our focus,” said Deputy State Treasurer Dr. Eric Scorsone, head of Treasury’s State and Local Finance Group. “By working together, we can help ensure the benefits promised by communities are delivered to their retirees and help ensure that the fiscal health of communities allows them to be vibrant now and into the future.”
Local units of government with a fiscal year that ended on June 30, 2017, or earlier, were required to report their pension and health care plan finances by Jan. 31, 2018. Entities with fiscal years ending after June 30, 2017, are required to report their retirement benefit plan finances six months after the end of their fiscal year and will be included in future rounds of reporting.
Any city on the list must provide a plan to the Treasury Department that demonstrates their “underfunded status” has been proactively addressed.
Local units that decline to file for a waiver or are denied a waiver must complete a corrective action plan to address their underfunded retirement benefits. Plans are reviewed and approved by the Municipal Stability Board, which is anticipated to have its first meeting in May 2018.
I’ve been sounding the alarm bell on state and local pensions for years. More states should adopt the one that Governor Rick Snyder and the Michigan Legislature did last year requiring municipalities to own up to their pension malfeasance.
Read more on the dangers lurking in America’s pension systems here, here, here, and here.