City to study $600M in unfunded retiree costs

Posted at 9:48 AM, Nov 25, 2015

The fate of hundreds of city employees' health care and pension benefits could rely on a proposed study. The city is $600 million short of the long-term bill for retirees.

The Financial Health Team is planning to hire a company to break down the possibilities for getting those legacy costs under control. It pins the problem on years of over-promising benefits, coupled with rising medical costs.

"We're not waiting for bankruptcy. We're not just going to wait and hope and pray for the best," said Mayor Virg Bernero. "We're going to act, and the way to act is to get the information."

Mayor Bernero is banking on hiring an outside firm to study Lansing's options.

"Without a good study like this, without knowing where we really are today, without getting that agreement, how can you agree on how to move forward?," Bernero added.

The city is planning on putting $100,000 into the study and it's hoping to get matching funding from the state. The Mayor says that higher cost upfront will prevent even bigger costs down the line which could hurt the city's budget.

Michigan State University Economist Eric Scorsone has been working with the city and says the problem needs to be dealt with sooner rather than later.

"From our projections this will continue to be a problem for the next decade," said Scorsone, an Associate Professor and Director of MSU's Center for Local Government, Finance & Policy.

Scorsone part of the goal of the study is to get solutions and understand how they'll impact the city.

"You have to look at using the Affordable Care Act or other options to see how do we provide health care coverage for people but doing it in a way that's a lower cost," Scorsone said.

Until those answers come retired employees like Scott Ellis don't know what to plan for. The retired Lansing Police Detective says his decision to join the force was never about the money, but there were long-term benefits he was relying on.

"It's a calling, it really is a calling. We want to protect people," Ellis said. "That was always a thing you do as an officer, and that at least you had your good retirement and your medical benefits."

Detective Ellis already has another job, so he says he might have to keep working for longer to help handle reduced benefits if it comes to that.

"We put our time in and there's a lot of other retirees that put in even more time than I did and this is what they counted on for their families."

The city has made changes to current employees retirement plans. Those employees are paying more toward their pension plans. Plus when they retire they're family won't be covered under the city's health insurance.

But there could be even more changes coming, something employees say make planning for the future difficult.

"Really what we want to know is that there will be something for us when we retire and if that means changes now we'd like to know about it now but we'd really like to be able to plan for retirement and once we are retired have those benefits stay," said Andy Kilpatrick.

The city say its goal is to have a plan before the next budget cycle in the spring.