Michigan Counties on the Verge of Pension Crisis

Lansing State Journal publishes op-ed on local pension debt

Michigan’s counties are drowning in pension debt and it’s time for their leaders to act to prevent future cuts to services or major tax hikes to residents.

Josh Paladino, a Mackinac Center summer research intern, wrote about the ballooning unfunded pension liabilities municipalities are facing in a recent op-ed published by the Lansing State Journal.

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When governments refuse or are unable to address unfunded pension liabilities, retirees are left vulnerable and uncertain about their futures while taxpayers are ultimately left holding the bill. In 2015, Michigan residents paid $405 million to county pension plans across the state.

Using Ingham County’s $125 million pension funding gap as an example, Paladino made the case for shifting new hires to defined contribution plans, rather than defined benefit, as a number of counties in Michigan have already successfully done.

Ten counties have shifted from defined benefit plans to defined contribution plans for new employees and together have 94 percent of the money needed to cover their pension debt. …

Oakland County tackled its pension debt in 1994 by shifting new hires to a defined benefit plan and now has a system that’s 98 percent funded.

Deputy County Executive Robert Daddow said closing defined benefit plans and enrolling new hires in a defined contribution plan will cut down on the required payments long term, while still providing solid benefits to retirees.

Collectively, Michigan’s 83 counties have a $2.5 billion unfunded liability and owe pensions to over 63,000 members in the system.

Read the full op-ed in the Lansing State Journal here.

Read Paladino’s in-depth report on Michigan’s pension crisis in Michigan Capitol Confidential here.

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