Tuesday, November 14, 2017
Director of Fiscal Policy
MIDLAND — The Mackinac Center for Public Policy released an interactive map showing which local governments have saved responsibly for the benefits they offer retirees and which have not.
Some local governments offer retired employees “other post-employment benefits,” or OPEB, in addition to a pension. Unlike pensions, however, municipalities aren’t required to set any money aside to pay for OPEB and many have chosen not to. The difference between what local governments have saved and the projected cost of these benefits amounts to billions in underfunding. Also unlike pensions, local governments can trim these retiree health benefits at any time.
According to data from the Michigan Department of Treasury, about half of local governments that offer retiree health insurance have saved little or nothing to pay these costs. For the cities and counties in Michigan that offer OPEB, the median amount citizens currently owe is $392 per person.
“There are no mandates for local governments to offer retiree medical insurance benefits, and few firms in the private sector do,” said James Hohman, director of fiscal policy at the Mackinac Center. “Yet local governments have continued to offer them and kick the costs to future taxpayers.”
The map shows how much each person living in a county or city would have to pay to fully fund their local government’s retiree health care benefits. The numbers can be stark: The Upper Peninsula’s Iron County doesn’t offer OPEB to retirees, but Crystal Falls, a city in the county, does and city residents would need to pay $4,157.69 per person to fully fund them.
The problem is especially pronounced in southeastern Michigan. In Taylor, for example, it would cost residents $5,410.67 per person to pay for benefits the city has promised, in addition to $265.75 per person to fund benefits for Wayne County government retirees. Taylor has underfunded these benefits more than almost any other municipality.
“This is self-inflicted fiscal malpractice,” Hohman said. “Most retirees from local government and former private sector workers don’t get these benefits. But for those municipalities that continue to offer them, it has stretched resources far thinner than the revenue sharing cuts that local government officials are constantly complaining about.”
The Legislature is currently debating how to tackle this problem and is expected to consider bills on the issue before the end of the year.
Look at the map to see how responsible your local governments have been.
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