The Michigan Department of Treasury released information Monday about local governments that have reported underfunded retirement benefits. Lansing was on that list.
The first round of reporting has taken place and the Treasury Department has found more than 110 out of 490 local units of government have underfunded pension or retirement plans.
“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 financed 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.
This law was passed and signed by Governor Snyder in December 2017.
Lansing's mayor Andy Schor sat down with the city's five-year-old financial health team Tuesday morning to discuss how they plan to deal with the $700 million hole in retiree pension and health care costs. The city plans to file a waiver with the state in response to that report. Mayor Schor said the waiver will show that the city has taken a variety of steps to close the liability and is ready to move forward.
It was the meeting of the minds as Mayor Schor put it when he referred to the financial experts, union leaders, and other business entities that joined the financial health team to discuss ways to get out of the hold.
"The effort today was to put options on the table to see what we need to do to make sure we have long-term sustainability in the city," said Lansing Mayor Andy Schor.
A lot of those options on the table stemmed from a 2017 report done by the Segal Consulting firm. Some of the recommendations the firm suggested were that Lansing gets rid of Medicare part B. Tuesday's meeting did not go into depth on that topic, but Mayor Schor told us he had his eye on another recommendation, "health care to health savings account system which is mostly the same benefit but different structure and could save money."
Ben Bakken, the vice chair of the City of Lansing Financial Health Team, said they are looking at how other cities have dealt with the same issue so they can stop it in its tracks sooner than later. "It doesn't have a due date on it so what happens is overtime for Lansing and other municipalities this issue has continued to grow and grow through non-action," said Ben Bakken, the vice chair of the City of Lansing Financial Health Team. Although Bakken and others are trying to find a solution, he said he wouldn't commit on any certain remedy for the problem right now.
"We are not at the point yet to say that we recommend you move forward with "X" as one of those. It's simply we need to begin a process to further evaluate," said Bakken.
Mayor Schor hopes the financial health team will have some options for the city council to vote on and put into action within the next six months.