Michigan Governor Rick Snyder’s Responsible Retirement Reform for Local Government Task Force today released a report of reform recommendations for rising pension and health care costs, retiree support, and stabilization of local government services. Snyder says the overall goal is to stabilize government pension and health care costs.
“Municipalities across Michigan and the nation are facing growing, unfunded long-term liabilities that jeopardize the quality of life in our communities, along with retirees and employees who depend on these benefits,” he adds.
State Treasurer Nick Khouri says the task force, which was announced during Snyder’s State of the State address in January, recommended four reforms to promote stability and restore funds designated for pension and other post-employment benefits (OPEB).
“A few broad principals are clear,” says Khouri. “Unfunded retiree benefits are growing and need be addressed now.”
At the top of the list, the task force is requesting that greater reporting and transparency be required from all local municipalities to more quickly evaluate the scope of the state’s biggest issues and identify where they exist. Additionally, designing a system of uniform financial assumptions were proposed to help juxtapose issues in a more accurate manner.
Another proposal calls for the creation of a pension and OPEB fiscal stress test system that would allow for integrated problem solving among local governments. The proposed system would alert and assist local governments in funding obligations while protecting employee and retirement benefits by quickly identifying the municipalities under the most fiscal stress.
While the first two proposals were created with the intention of identifying these fiscal issues, the third proposal is intended to fix them; the task force says that the creation of a Municipal Stability Board (MSB) would allow for a thorough evaluation of a local unit’s finances and how to correct the issue.
Khouri notes that the benefit of concentrated problem solving allows for specialized solutions on a case-by-case basis.
“The solution must balance commitment to employees and a local government’s obligation to all of its residents,” says Khouri. “But the problem varies across the state, so solutions need to recognize these differences.”
The last proposal recommends that all local governments should be required to meet a minimum requirement to pay OPEB normal costs for new hires, in ways such as prefunding obligations.
“I thank the task force members for dedicating their time to this pressing issue and I look forward to reviewing their recommendations and working with the Legislature to implement reforms,” says Snyder.
The full report can be found here.