LANSING, Mich. — Sen. Jim Stamas on Thursday introduced reforms to ensure local governments have the financial stability to continue vital services and provide reliable retirement benefits to their employees.
“Local public servants are a valuable part of our communities and help make them a great place to live,” said Stamas, R-Midland. “We owe it to them to keep the promises that were made to them and to ensure they receive the retiree health care benefits they earned while serving us. Unfortunately, the average local government pension and retiree health care plan is only 19 percent funded, and nearly half of the plans have no pre-funding in place.”
Stamas served as a member of the governor’s bipartisan Responsible Retirement Reform for Local Government Task Force, which released its findings this summer.
Local governments are currently $18.8 billion in the red on their pension and retirement health care obligations.
“This debt burden threatens the benefits for local workers and squeezes funding from public safety and infrastructure needs,” Stamas said. “Our goal with this legislation is to increase transparency and guard against irresponsible use of tax dollars, preserve local control and encourage local solutions.”
Senate Bills 686-701 would create a five-stage stress system with additional reporting and steps for local governments with unfunded liabilities to develop and implement action plans to address the community’s debt.
“Under the reforms, the majority of locals will never need to move beyond the first step, which requires reporting of costs and benefits to accurately assess retirement costs and taxpayer obligations,” Stamas said. “It is best for local governments to know as early as possible if their pension or retirement benefit plans are in trouble. They can then use tools to help resolve the problem before it impacts worker or retiree benefits.”
For communities found to have a financial problem, the measures would create a Local Retirement Stability Board. If the local government and labor cannot reach an agreement on an action plan that is approved by the stability board, the community will have a three-person Financial Management Team made up of one resident of the community, a local government expert and a financial expert.
“Thankfully, many local government and labor leaders have recognized the looming crisis and have already taken steps together to improve the situation for their employees and communities,” Stamas said. “This reform will help those communities that either are unaware of their growing debt issue or have not been able to solve the problem.”