March 28, 2024

Never an Encouraging Word

April 1, 2016
NEVER AN ENCOURAGING WORD

We get it, already.

The Grand Traverse County Board of Supervisors has done a splendid job of telling us there is a serious budget problem, including deficits in both operating costs and in the county employee's pension system.

Some supervisors have been singing this song for a couple years now, and rightly so. This is bad news they didn't create but had to deliver. But it might be time to move toward a solution and perhaps an occasional bit of dappled sunlight. Grand Traverse County has become the place where never is heard an encouraging word.

Suggesting a reduction in their own salary to $1 a month and eliminating per diem expenses, or at least the salaries and per diems of whoever is on the board after the next election, was nicely symbolic but makes no substantial difference. The county won't save much more than they added when they gave Administrator Tom Menzel an assistant.

(There is actually a more logical argument that they deserve more than the $7,000 annually they receive plus per diem for attending endless meetings. The old axiom about getting what you pay for might hold true.)

So what's the deal? The employees' pension and health insurance deficit is zooming toward $60 million, the pension now funded at a precipitously low 48 percent.

How? For many years, perhaps as many as fourteen, former boards didn't pay the county's share into the fund. Simple as that. Some years they received permission to skip the payments from the Municipal Employee Retirement System (MERS) and some years they just didn't do it.

It's easy to blame previous county leaders — and they are culpable — but it is disingenuous to claim we didn't know this was happening. Union leaders and members complained openly and bitterly and were ignored by both previous boards and the public.

The information was there had we been listening and, ultimately, the debt is our responsibility.

Fortunately, the pension fund does not have to be funded to 100 percent; almost none are. Usually 80 percent is considered safe and adequate. Future obligations have to be based on the notion people currently in the system are going to retire and draw their pension. But some employees will quit, some will retire early and some will die. So if the board decided to try and restore the fund their target need not be the full amount.

Longer-term solutions are needed. Regrettably, defined benefit pension systems for government employees in small municipalities all have the same weakness; eventually there are more retirees drawing money from the fund than employees contributing. It becomes impossible when the employer, in this case the county, pays none of their share.

Changing to a defined contribution system in which more of the responsibility falls on the employee is the future. The question becomes how to protect retirees and long-tenured employees when the system changes.

There is a template, of sorts.

The public safety pension system in Arizona has dipped to only 49 percent of full funding and is short a staggering $12 billion. Municipal governments there face annual budget crises while watching employee retirement costs skyrocket. It became financially untenable and the legislature started their regular rumblings about doing away with public employee unions.

Instead, the statewide firefighters union and a group of conservative legislators, long-time and often contentious political adversaries, sat down and cobbled together a reform package that protects current retirees, allows new employees to choose between a defined benefit and defined contribution system, requires employees to pay a significantly greater share of their retirement and healthcare costs (eventually a 50-50 match), ends fully funded health insurance for retirees, and caps annual cost of living increases.

Cities will save money, union members keep alive the concept of a pension.

It isn't exactly an apples-to-apples comparison, but it's likely more instructive than a blue ribbon panel of local business leaders and proves solutions can be found.

Unions continue to provide a path to the diminishing middle class. (Full disclosure: I was a paid consultant to the United Phoenix Fire Fighters union for nearly three decades.) They now need to make some concessions in order to save the organizations to which they belong.

This mess happened on our watch fostered by people we elected. The current supervisors have accurately described the scope of the problem. It's our obligation to help fix it. The county board should clearly tell us how much that is going to cost county taxpayers, and then we should pay it.

The pensions of retirees should not be part of the bargaining. That is our obligation and our debt. Current employees will have to accept changes but stealing away money from the 500 or so county retirees would be a cowardly decision by all of us.

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