Taxpayer Debt to Pay Government Retiree Health Benefits

Legislators loading (more) debt onto taxpayers to pay the health benefits of retired government employees may make many voters wonder who these pols really work for. Here's the latest version, from

Senate Bill 927, introduced by Republican Senators Mark Jansen, Bill Hardiman and Roger Kahn, to give local governments the power to borrow without a vote of the people to pay for the health benefits that current and past officials have offered to government employees after they retire. A referendum on the debt would be required only if someone gathered signatures from 5 percent of local registered voters or 10,000, whichever is lower. The amount of debt imposed could be as high as 5 percent of the jurisdiction's state equalized property value.

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The House has actually passed a measure allowing this. The Senate passed a similar measure back in 2006. They allow local governments to borrow and put the money in the stock market. If it goes up, the profits would pay for the extra government retiree benefits.

Back in 2006, the debate was how much reform would they need to do first to qualify for the new borrowing, and the answer was, "Not much." They just had to "mitigate the increase in" the benefits' costs, not "reduce" them, which pretty much means nothing at all. This year's bills repeat that.

Here's the reality: There's not enough money in the world to pay these benefits. Their present value for state employees is $13.5 billion, and $26 billion for school employees. There are approximately twice as many municipal as state employees, most of whom think they're going to get these benefits, for which little or nothing has been set aside.

They are not going to get them, because Michigan taxpayers can't afford this, so the only real question is how big a "haircut" will they get. While pension obligations may be more or less sacrosanct under the state Constitution and federal law, the obstacles to clipping these costs appear to be more political than legal.

That's why government employee unions want the new borrowing: Unlike politicians' promises, government bonds are unambiguously enforceable obligations.

By the way, all these people qualify for Medicare at age 65, just like everyone else. The difference between them and other Michigan citizens is, (A) most people can't retire with benefits in their 50s, and (B) most people don't get post-retirement health insurance.

Also, Sen. Jansen is reportedly maneuvering to succeed Mike Bishop as the next senate majority leader. Bills like this may make some wonder what difference it would make if he became the senate minority leader.

Let's forget the idea of further bankrupting the state with more debt. Instead, let the haircutting begin.