FILE - Michigan State Capitol

The Michigan State Capitol in Lansing, Michigan.

State Rep. Thomas Albert, R-Lowell, sponsored “best pension practices” that could save millions of dollars through more conservative and updated assumptions.

House Bills 4530-4533 would adjust actuarial tables to include more recent data for life expectancy, pay future unfunded liabilities faster and mandate the state pay required contributions.

Albert said the state has experienced deficits on its employee pension contributions by more than 20 percent several times.

“If you go back and look at what our payments have been and how much we’ve contributed to our actual pension payments, there’s been some pretty significant shortfalls,” Albert said. “In the last 20 years, we’ve actually only made the payment a few times.”

Albert’s proposal requires the state to pay off any difference in one year, down from five years and update Michigan’s pension mortality table from assumptions from 2000.

“This is the worst kept secret in the world; people are living longer,” Albert said. “So, just as an example, our annual payment is going to be increasing from about anywhere between $300 [million] to $400 million annually because these mortality tables weren’t updated.”

James Hohman, a fiscal policy director at the Mackinac Center for Public Policy, a Michigan-based educational and research institute, told The Center Square that government has a fiscal and moral obligation to secure the promises they’ve made without pushing debt onto future taxpayers.

Albert said that many believe Michigan’s debt will be paid off by 2038, but that’s just one debt period--a recession could hinder contributions without changing the debt maturity date.

That’s a problem because Michigan will have fewer years to spread payments out to mitigate risk.

“People think we’re getting closer to the end zone, and the closer you get to that end zone, the less room you have,” Albert said. “So if it gets to be the year 2032, and we have to pay an additional $5 billion in debt but we only have six years to spread that out, it would overtake the budget.”

Albert said this bill isolates each year as its own debt period and spreads losses or gains over time.

“We’re being more proactive, we’re planning on the markets being cyclical, and we’re going to have a plan in place so our school fund aid isn’t going through a crisis,” Albert said. “It shouldn’t take 20 years to improve your return rates or to update your mortality table.”

“So if you look for this year, we have to put in $3.5 billion into the pension fund for just the school legacy fund alone,” he said. “That’s about $0.26 on the dollar for all state revenue.”

That’s money not going into the classroom.

The proposal would cap the assumed rate of return and discount rate at 6 percent down from 7.5 percent.

“We have pension crises everywhere from small government to large government,” Albert said. “And it’s kind of like everybody’s thinking somebody else is taking care of it, and it turns out nobody’s taking care of it.”

“What we’re trying to do here is institute some best practices so we don’t get in this mass debt 30 years from now, so my kids aren’t sitting here in the same spot figuring out how they’re going to pay for all this.”

Albert said the new auditor will provide analysis and work independently, so they can double-check estimates to see if they can find any differences.

Albert cited a Louisiana auditor who found that the state’s equivalent of Office of Retirement Services was using incorrect assumptions that artificially lowered their payment.

“We’ve designed our pension structure for a best-case scenario,” Albert said. “And I live my life hoping for the best and planning for the worst. So I’m hoping we can start planning for the worst-case scenario.”

Staff Writer

Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on and Previously, he worked as a financial analyst at Pepsi.