Our report last week on the financial pressures of pensions in Grand Rapids caused quite a bit of discussion in Michigan’s second largest city, as reported by the Grand Rapids Press…
City Fiscal Director Scott Buhrer said the Center for Michigan’s study confirms the warnings he has shared with city commissioners in recent months. Future arbitration cases for police and firefighters may limit the city’s choices even more, thanks to Public Act 312, the state law that imposes binding arbitration on cities during labor disputes, Buhrer said. “In that regard, the city’s choices may be secondary to the arbitrator’s choices,” Buhrer said.
Fred LaMaire, a consultant to the Grand Rapids Police Officers Association and other police unions, said the pension benefits enjoyed by Grand Rapids police officers are not out of line with other large cities. “I don’t know of many law enforcement agencies that don’t have good pension plans,” LaMaire said. Police unions gave up pay increases when they bargained for the pension benefits, LaMaire said. “If we didn’t take those pension increases, we might be making over 100 grand a year.”
The Center incorrectly quoted an actuarial report for Grand Rapids’ general retirement system in reference to the city’s police and fire retirement system. While that error did not change the main conclusions of our report, corrected statistics regarding the number of pensioners, etc. are now in the Center’s report, which can be read here.
Our report also prompted numerous calls, emails, and letters from other communities across the state.
“Your November 11 article on Grand Rapids was illustrative of the problems outlined in my local article earlier in the week,” wrote Traverce City Commissioner Michael Gillman.
“How can it come to pass that a small city, conservatively managed, can generate an unfunded (pension) liability of $38 million, approximately $2,600 for every man, woman and child in our community?” Gillman asked in his Record-Eagle column. “The current model of defined benefit pensions in the public sector is broken… if it was ever viable.”
6 Comments
When I worked at GR City Hall in the Executive Office there was almost continuous discussion about the pension system. The paid adminstration told the elected officials repeatedly that not saving for this rainy day was poor planning. Anyone with a basic understanding of economics could predict this type of down cycle. Each year the previous Manager would begin the budget process with money reserved or escrowed for future pension expenses and every year publicity hungry elected officials would move that money into pet programs or projects. Promises were made to employees in the form of contracts approved by these same elected folks, now they must live up to those promises – not just to public safety but all employees.
This is not just a public pension issue…the private sector has broken its promises to employees time after time. It’s really interesting that we as a society look down on people who walk away from mortgages, and pay millions to CEOs who ignore their own liabilities and then dump their pension responsibilities onto the Pension Benefit Guarantee Corporation. Here’s the place on the PBGC web site for auto-related pensions where those companies — managed by people who care about quarterly earnings more than the long-term future of their businesses — did exactly the same: Made promises, then spent the money (often on executive bonuses or higher dividends to shareholders) that should have been set aside.
http://www.pbgc.gov/workers-retirees/auto-sector.html
Here in Michigan, we have done that this decade by cutting taxes. If our effective tax rates had stayed the same this decade as they were in 2000 (under Gov. Engler), instead of the major tax cuts we implemented and still are handing out, we COULD have put $50 billion away to cover our public pension promises. Instead, the term limited Legislature — on both sides of the aisle — ignored their responsibilities by cutting taxes. Why wouldn’t a term limited lawmaker talk out of both sides of his or her mouth? They have the same long-term responsibility as the CEO of a company does today…NONE.
Companies go broke and cities should be allowed to as well. Until unions recognize that if they kill the golden goose they may end up with nothing. This must be a teachable moment !
The days of sticking taxpayers with the bill are over !
David
You cannot seroiusly expect the taxpayer to pick up this bill.
While I agree that the private sector has “Enroned” many pension and retirement systems and I have little faith that it will end, I still – ever naive – try to hold publicly elected officials to a higher standard. If we, the voter/taxpayers, permit them to welch on this obligation there will be no end to the pain. One of the last things that we want to deal with is a larger population of impoverished elderly. Maybe one step in the solution is to permit someone to retire after 30 years but they cannot begin to collect their pension until age 65. They can work at a second career like many of the rest of us are forced to.
We sold our souls to China years ago so that we could enjoy cheap goods. In the process we destroyed the manufacturing base in America, bullied Unions and chastised them as the cause of all evil in America, distributed the wealth to the richest Americans out there. There is a class warfare people and the rich are winning it. I laughed when the smart marketing experts claimed Obama was going to redistribute the wealth in this country. Reagan effectively did this over 30 years ago with his Trickle Down Economics which gave tax cuts to the richest Americans out there. The idea was that they would create jobs. This was a great sales job except the rich do not create jobs as they hoard their money and develop ways to keep it in their pocket. Now 2% of America control 90% of the money and, 98% of America holds the rest of it. This has insured that Americans wages have remained stagnant for the past 20 years while CEO’s of corporations have been rewarded to the stratosphere and select shareholders have gotten insanely rich. They also have fought to keep capital gains tax down to 15% which insure that many Americans pay a higher percentage of tax than billionaires. They are also effectively lobbying for the reduction or elimination of social security and other social programs including Medicare, elimination of estate taxes so that they can pass on huge wealth for generations to come. If they have kept taxes low, so that cities become bankrupt, they will get out of their obligations in a minutes notice. This is why the Republicans have always hated what they called; “Tax and spend Democrats” while they have been; “Borrow and spend.” If they run out of money it will be easier to sell the American public on how American it will be to give up what you have paid in to your entire life. Gee folks, we are trillions in the whole and cannot afford to pay you your social security. We will have to raise the retirement age, reduce or eliminate your benefit, etc.” Check out the radical proposal that Paul Ryan is proposing: http://www.huffingtonpost.com/stephen-herrington/paul-ryans-killing-of-soc_b_457945.html. Now if you are a roofer and, do not mind working till age 70, more power to you. Of course this idea is banking on the idea that many people will die off before they even have an opportunity to collect social security. It was never designed as an investment for people but has kept 47% of senior citizens out of abject poverty. But they will spin this to the point that the uninformed will believe anything. Ryan’s plan is guaranteed, those that choose to privatize will have their plan guaranteed by the ones who do not have private accounts. That is a recipe for disaster and, anyone who has been around for this little recession we have just had in America will realize that the privatization of social security plays on people’s greed but will benefit Wall Street before it benefits the retirees. An even greater article to read is Bill Moyer’s piece on; “Welcome to the Plutocracy.” Scary stuff people but we manage to vote people in who typically support an agenda of the few instead of the many. http://www.truth-out.org/bill-moyers-money-fights-hard-and-it-fights-dirty64766