Michigan’s largest 100 cities have an accumulated public pension shortage topping $5.5 billion, according to an updated report compiled by the Mackinac Center for Public Policy (MCPP). In order to make up the deficit, every resident in those 100 municipalities would need to pony up $1,048.
The MCPP report found only five cities in the top 100 largest possesses a fully funded pension system. Only 15 cities use defined-contribution plans, which ensure employees pay directly into their retirement account and thereby prevent government employers from deferring payments as so often happened with traditional pension plans.
“Local government officials accidentally made their own employees some of their largest creditors by underfunding their pension systems,” MCPP Fiscal Policy Director James Hohman told The Center Square. “This is unfair to the workers and bad for the taxpayers and residents of the municipality.”
Near the top of the list of cities with serious pension liabilities is Lansing, which is only 61 percent funded with a shortage of $290 million. Redford’s pension liability is $71.8 million, and only 43 percent funded. Taylor is only 61 percent funded with a pension liability of $109 million. Westland’s pension fund is only 61 percent funded and $141.6 million short. Detroit's is 74 percent funded, with nearly $1.8 billion in liability.
“There has been some progress in catching up in some places,” Hohman said. “But it’s disappointing that strong market returns haven’t closed the gap between what has been saved and what has been promised in pensions.”
The Michigan Senate compiled a list of statewide public pension liabilities broken down by job classification. In fiscal year 2017-2018, the total accrued unfunded liability for pensions was $40 billion. Michigan Public School pensions represented the largest portion of the deficit at $32.75 billion at only 60.5 percent funded. State employees’ pensions are only 65.8 percent funded and $6.5 billion short.
Citizens Research Council of Michigan Research Director Craig Thiel told The Center Square the state is obligated by law to honor its pension promises.
“The problems we’re facing today don’t get better with age,” he said.
“Financing these promises directly competes for limited local government resources available to fund important services – public safety, roads, and public safety,” Thiel continued.
“The sooner that local governments pay off these liabilities, or at least make sure that they have a viable plan to do so, the sooner that retirees will be assured their retirement benefits are safe and citizens know that their taxes are going to fund government services received today, not five or 10 years ago."