Opinion | Why does ‘fixing’ Michigan pensions stick it to workers?

Leonard Page lives in Cheboygan and is a retired United Auto Workers attorney

Bridge Magazine has been highlighting the fact that many public employers (and taxpayers) now face large unfunded retirement liabilities for pensions and retiree health care. I spent most of my legal career suing employers who tried to cut vested benefits for past retirees. I have spent the last six years suing to get health care benefits restored for county road commission retirees.

Many communities and counties claim the costs are too burdensome and seek relief either from the state or its employees/retirees. I write to suggest that this “problem” was really just a poor choice made by public employers to defer paying (funding) for these benefits.

Kicking-the-can-down-the-road was easy - until now. But retirees are not responsible for this lack of funding and arguments that they should accept cuts are unfair.

Employers always have the right to change benefits, including retirement benefits, for active employees – current workers who can react by choosing other employment. By contrast, retirees experiencing cuts are generally no longer working, and thus have few options.

More importantly, retirees earned these benefits and chose to remain with the public employer over their working lives - rightly expecting that retirement promises would be honored. Employees often chose to trade present wages for these deferred compensation benefits. Indeed, such planning is usually encouraged.

More importantly, the recommended “fix” (freeze or terminate pension and retirement health care benefits for current employees) has some unfortunate long term implications. Why does the ”fix” always stick it to the working class? Replacement defined-contribution plans are simply not the same as constitutionally-guaranteed pensions. (Michigan Constitution, Article IX, Section 24) Far too often, these savings plans simply are cashed out before actual retirement, or are simply not adequate.

The average 401(k) balance is under $50,000. How long will that last if the average retirement period remains at 15 years? Pensions are disappearing, and are now available for less than 25% of full-time workers. In 1975, that figure was 90%.

The Citizens Research Council of Michigan issued a report in July 2009 that notes that Social Security only amounts to 30 percent to 50 percent of pre-retirement income. Absent national health insurance, we can continue to expect health care costs to increase dramatically, while employers

also seek to shift costs to employee/retirees. The report concludes that these “cost shifting” employer reductions in retirement benefits necessarily means future generations of elderly will be “poorer”. Most will also be forced to retire later.

If you want to point fingers, obviously the past boards or elected representatives who granted these benefits and then decided not to set aside funds to pay when due, are the primary culprits. They clearly chose to shift these costs to future elected officials and taxpayers. I just

do not understand complaining that employees who sought, or the public-employee unions that negotiated, for retirement benefits are somehow at fault.

Our elected state government also played a role in letting this “crisis” occur. In 1974, Congress responded to the failure of some private employers to pay retirement benefits by passing the Employment Retirement Income Security Act. ERISA provided for minimum funding standards

and reporting requirements for employee benefit plans. In 1990, the Financial Accounting Standard Board issued Standard 106, requiring that these costs be reported in financial statements as debt when the “employee renders the service necessary to earn their

post-retirement benefits.” In 2004, the Government Accounting Standards Board issued Standards 43 and 45 to warn that non-pension retirement benefits should not be handled as “pay-as-you-go” costs. My point is that funding failures for future deferred retirement benefits has been a well-known problem for almost 50 years.

In 2017, the State finally required public employers to report and fund these costs. Better late than never, I guess. But had such deferred-compensation benefits been properly funded when created, we would not be here. As usual, the solution puts the burden on employees/retirees - those least able to deal with it.

Bottom line - look in the mirror if you really need to find someone to blame for unfunded liabilities - you voted for those who chose to let this “crisis” develop.

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Comments

Trifle
Thu, 03/07/2019 - 8:02am

Mr. Page wonders why anyone would think "employees who sought, or the public-employee unions that negotiated, for retirement benefits are somehow at fault." Asked and answered in the same breath: because the employees and their unions negotiated for those benefits, and without caring how those benefits would be paid for.

Chuck R
Thu, 03/07/2019 - 9:38am

I was involved in collective bargaining for years on the management side of the table. It is unfair to blame the employees for the fact that public agencies did not properly fund the pensions in current time frame. The legislators and other elected officials are responsible for kicking the can down the road and making the solution impossible in many instances. If the officials would have allocated the true cost of the contracts at the time, we (the public left holding the bag) would have seen the problem in real time. Instead they pretended to balance the budget by underfunding pensions. Shame on them.

Matt
Thu, 03/07/2019 - 11:05am

Where was the union when this was going on? This went on for years with no blow back from the unions, why?

Cindy Miller
Tue, 03/12/2019 - 10:52am

As a union rep and negotiator, I can tell you where the union was......on defense! Every time we were able to make headway, our legislators simply changed the laws for retirement, for healthcare, for school funding. We were pushing back every day but the teachers working sixty hours a week could not see the battle going on behind the scenes. As I once did (until John Engler was so open about his attacks on public education and the funding for our children) most teachers believe their legislators have their best interests at heart. After all teachers sacrifice themselves for their clients continually. As it turns out school funding was targeted as "easy money" by the charters and private school owners so our legislators sold us down the river over and over. So much for thinking about the future with a certain party in the majority for decades now.

Tough Love
Tue, 03/12/2019 - 7:51pm

You started your comment with ................. "As a union rep and negotiator".

Taxpayers needen't look further. You care about NOTHING but MORE and MORE and MORE for your members, and to hell with the Taxpayers.

And when we hear you say ........... "it's for the children" ............. we're not fooled for a moment. NOT one dime of additional taxation supposedly earmarked for "education" actually gets INTO THE CLASSROOM. ALL of it goes toward funding your members' unnecessary, excessive and unaffordable pensions & benefits.

Public Sector DB pensions should be frozen (with ZERO further growth) and replaced for future service with a DC (401k-style) Plan with a 3%-of-pay Taxpayer contribution AND NO MORE, just like they typically get from their employers.

AND, Public Sector workers should get the SAME retiree healthcare subsidy that Private Sector employers typically provide to their retirees .... NOTHING !

Bob Balwinski
Thu, 03/07/2019 - 10:18am

Trifle, look up the word "negotiations" in a dictionary. Contracts "negotiated" have to be approved by both sides before taking effect. I repeat....BOTH sides.

leonard page
Thu, 03/07/2019 - 10:23am

In the 50s and 60s when these retirement benefits were put on place, there was no emergency manager option. Moreover, the typical public employer response to questions about funding was = "that's our problem." Unrepresented public employees had no say in anything

Le Roy G. Barnett
Thu, 03/07/2019 - 8:41am

For a quarter-century I worked for the State of Michigan. I now live off the pension I accrued during that tenure. If, for some reason, the State decides to change its commitment with respect to my pension, then I should have the right to get my job back so I can once again have a livable income. If one party can modify an agreement, then the other party should be able to do so as well.

Matt
Thu, 03/07/2019 - 11:07am

The state isn't the issue it's the municipalities. Chill.

Barry Goldman
Thu, 03/07/2019 - 8:50am

Mr. Page is certainly correct. Reducing or eliminating pension and retiree heath care benefits that workers were promised is unjust and unfair. I agree completely. But that's the easy part. The hard part is coming up with a solution. Where does Mr. Page propose to get the billions of dollars necessary to fund those benefits? Take it from the roads? Take it from the schools? ... I'm listening.

Boiling
Mon, 03/11/2019 - 11:04am

Start with a part-time Legislature, eliminate legislature benefits, and reduce their staff. Then at the local level, reduce all fulltime local politician who are sitting on negative retirement account funding to a wage equal to that community living wage, until the debt is paid off. This would be a good start.

Ren Farley
Thu, 03/07/2019 - 8:53am

This is a thoughtful essay. How will this challenge of unfunded pensions and other post
employment benefits be solved? Will local governments opt for bankruptcy? Will the
state legislature try to prevent that?

Ron Robinson
Thu, 03/07/2019 - 9:01am

I would say public workers need to look to their union leadership who negotiated the contracts and politically helped elected public officials who will support their contract demands. The union leadership was elected by their worker membership and therefore the worker bears some of the blame. They have now caught themselves in a catch-22 situation.

Also, the same public union leadership and workers are pushing Republican and Democratic legislators to exempt their pensions for Michigan income tax and giving them an advantage over other retired workers in the stay. These public pensions are some of the most generous given by any employer, and to exempt them from taxation is fiscally irresponsible considering the large unfunded debts these pension put on our local and state government.

Andrew
Thu, 03/07/2019 - 12:04pm

Why do workers have any blame? They didn't force the other side to agree to their demands. It was bargained in good faith. If the municipality didn't want to pay the cost then they shouldn't have agreed to the terms.

Tough Love
Fri, 03/08/2019 - 8:25am

Why did the Elected Officials agree ?

Because they couldn't resist your Union's BRIBES disguised as campaign contributions. And you think the Taxpayers should honor such underhanded deals ?

When "pigs fly".

Ruth
Thu, 03/07/2019 - 12:53pm

Ron, you need to read the proposed legislation. It provides a capped exemption for all pensions, public and private. Even before the pension tax was initiated by Snyder, private pensions had a capped exemption.

Ron Robinson
Fri, 03/08/2019 - 11:15am

For federal income tax purposes, pensions are taxed the same as wages. Besides the pension grandfather provisions in the current Michigan tax code, pension income and wage income are taxed at the same level. Pension tax reforms under the Snyder administration were designed to bring tax equity around this issue.

All individual earned income no matter whatever sourced should be taxable at the same threshold. How is it equity for a retiree with a pension not to pay Michigan income tax on the income when a worker with the same level of wage income does have to pay a Michigan income tax?

Republican and Democratic lawmakers' pension proposals are pandering to voters.

Carl Ver Beek
Thu, 03/07/2019 - 9:07am

Leonard is " still at it".

He is a wonderful guy and spent his career on the union side of the table.

I spent my career on the other side of the table, trying to reach agreements and avoid strikes.

A fundamental fallacy of the UAW and other unions is that they insisted on earlier retirements than could be funded realistically. Shortening the number of years working plus the lengthening of life expectancy ( together with unrealistic actuarial advice on the earnings of pension funds) have created the problem.

Unionization of the public workforce created a fundamentally flawed bargaining process since elected officials were often funded in their campaigns by the unions, and often agreed to unrealistic benefits.
It's easy to spend other people's money.

Tough Love
Thu, 03/07/2019 - 10:58am

Yes, YOU understand the problem .......... excessive "generosity". And as bad as it is in some PRIVATE Sector Union Plans (e.g., the UAW), it's MUCH worse in Public Sector Plans , they being far MORE generous.

It's not uncommon for Police to retire and begin collecting a COLA-increased pension of 75+% of their final pay in their early 50's. Such Plans have a "value" (and hence COST) 5 to 6 TIMES greater than Private sector DB Plans (which are themselves mostly frozen due to the high cost).

Cindy Miller
Tue, 03/12/2019 - 10:59am

It wasn't unions who sought early retirements. It was administration and it was seen as another way to balance the budget. Get rid of teachers with seniority and hire a newby straight from college. Substitute teachers? Anybody with a heartbeat will do! Shame on legislature. We are $2000 per pupil short of proper funding and still give away tax dollars for the wealthy. Oh that's right, property taxes will now make up the difference. AA

Tough Love
Tue, 03/12/2019 - 1:12pm

If you're "$2000 short per pupil", that should come from reductions in teacher pension & benefit promises, they being ...... by MUCH more than $2000 annually ............ greater than the retirement security typically granted your Private Sector counterparts by their employers.

Public Sector workers are not "special" and deserving of a better deal ..... on the Taxpayers' dime.

Arjay
Thu, 03/07/2019 - 9:11am

The answer to the problem is bankruptcy. If the unions aren’t willing to accept negotiated reduced benefits in the face of stagnant or declining revenues, then bankruptcy will allow the government units to shed the pension obligation totally. Otherwise, we will have government units whose sole and only job is to transfer tax revenue to pension benefits.

Wolfman
Thu, 03/07/2019 - 9:21am

As a autoworker retiree with a fixed defined pension I can see the perils of depending on a single employer. UAW autoworkers now have a 401K that they own and can invest in a diverse range of investments. In a changing world this makes more sense than depending on an employer who often times go into bankruptcy by laws that favor the business community. Protections through the PBGC are underfunded and leave many with few options in their old age.

Aldon
Thu, 03/07/2019 - 9:25am

People who developed the idea for pensions knew that the chickens would eventually come home to roost. It is a ponzi scheme of immense proportions. If you only have so much money in circulation, what replaces the money you take out of circulation to fund the pension. In the case of the USA, it is the national debt. You will never pay it back, unless the USA government decides to print the money into circulation instead of borrowing it into circulation.

Reed
Thu, 03/07/2019 - 9:30am

"Obviously the past boards or elected representatives who granted these benefits and then decided not to set aside funds to pay when due, are the primary culprits. They clearly chose to shift these costs to future elected officials and taxpayers." Absolutely correct. But the boards and past elected Representatives can't be charged for mismanagement. The burden must be passed to the working class that was promised the benefits, or working class taxpayers that will have to pay much more at a time of stagnant wages. There is no fair option at all.

Rick
Thu, 03/07/2019 - 9:45am

So the elected officials who negotiated these benefits have no blame? Is that what you're saying?
Wow.

Tough Love
Thu, 03/07/2019 - 9:51am

What you fail to (or simply don't want to) acknowledge is that with only VERY small differences in "wages" in comparable Public/Private Sector jobs, PUBLIC Sector pensions & benefits are (almost everywhere) excessively generous, having MUCH greater per-year-of-service "formula-factors", allowing for a full/unreduced retirement at an age often 10 years younger than that typical of Private Sector Plans, and almost always including COLA-increases (all but unheard-of in Private Sector Plans). The composite of those Public Sector Plan "advantages"TYPICALLY makes PUBLIC Sector non-Safety worker pensions 3 to 4 times greater in "value" upon retirement (and hence 3 to 4 times most costly) than those typically granted the lucky few Private Sector workers whose DB Pension Plans aren't already "frozen", and who retire with the SAME wages, the SAME years of service, and at the SAME age. AND .......... that 3 to 4 times greater rises to 4 to 6 times greater for Safety-worker pensions (e.g., Police, Fire) which are even MORE generous, and hence the MOST egregious and cstly. And of course results in MUCH greater PUBLIC (than PRIVATE) Sector "Total Compensation" (wages + pensions + benefits).

It is VERY clear to those reasonably well informed and with an open mind and functioning brain that the REASON why Public Sector Plans are so extraordinarily generous has it ROOT CAUSE in the collusion between the Public Sector Unions and America's State , City, and Town Elected Officials, with the former BUYING they favorable votes of the latter (on Public Sector pay, pensions, and benefits) with BRIBES disguised as campaign contributions and election support.

There is simply ZERO justification for Taxpayers to fully fund very rich PUBLIC Sector pensions & benefits that are CLEARLY the result of such underhanded Union/Elected-Official deal-making, and collusion.

Taxpayers should avail themselves of every and any means to fund ONLY the share of those promises (certainly no more than 1/4 to 1/2 of that "promised") that likley WOULD HAVE been granted in the absence of that collusion.

Gene Jacoby
Thu, 03/07/2019 - 10:56am

Amen! Just a couple of added points. Public EMPLOYERS found it very easy and personally beneficial to continue Defined Benefit pensions, which private employers dropped decades ago because they are unaffordable, with fantasy assumptions regarding annual growth . These employers enjoyed the same pensions. Self serving? And of course the Unions and their membership negotiated these unsupportable defined benefit pensions. They've known for years they were in serious trouble but public employers AND employees refused to do anything that might have mitigated the problem. So they have no blame??

Ruth
Thu, 03/07/2019 - 1:01pm

Not all unions are able to negotiate pension benefits. One of the largest pension programs in the state is the Michigan Public School Employees Retirement System (MPSERS). The plan benefits are determined by the legislature. Also, MPSERS members are required to contribute a percentage of their income into the pension plans as is true of many other employees.

Tough Love
Thu, 03/07/2019 - 2:59pm

Quoting ................
"Also, MPSERS members are required to contribute a percentage of their income into the pension plans as is true of many other employees."

So what ? Public Sector employEE contributions (INCLUDING all the investment earnings thereon) rarely accumulate to a sum upon retirement sufficient to buy more than 10% to 20% of their VERY rich pensions. Taxpayer contributions (and the investment earning thereon) are responsible for the 80% to 90% balance.

If Public Sector pensions weren't so ludicrously generous, a LARGE portion of the Taxpayer's 80% to 90% responsibility would go away, and the investment earnings on those not-made contributions would stay in the Taxpayers' pockets, perhaps to help fund their much SMALLER retirements.

Christine
Thu, 03/07/2019 - 9:51am

A pension is a promise. Again, someone trying to blame unions for the fault of the employer. This is not the fault of the workers or the unions, the fault lies squarely in the hands of incompetent management. Employers have been pushing those promises to the back of the line, instead of handling these issues headon. Especially for government employers, higher tax rates could have and still can fund these promises. Much like the Feds raiding Social Security, the money should be there and kept in a "locked box". I'm tired of lame excuses for mismanagement.

Matt
Thu, 03/07/2019 - 11:13am

the unions were completely aware that these funds weren't being funded and relied on thinking the taxes would be raised to what every amount necessary. Bad assumption! The unions are just as responsible for allowing this to go on this long as the munies and should be held liable.

Robert
Thu, 03/07/2019 - 9:51am

Thank you Mr. Leonard for a thoughtful article. Two questions:
1. Were (are) public pensions and benefits subject to ERISA? If not, why not?
2. What effect, if any, is there upon the funding shortfall due to municipal employers' elections to convert future plans to defined contribution plans?
Thank you.

Matt
Thu, 03/07/2019 - 11:03am

Public pensions are exempt from ERISA rules. Yah, crazy! Those short falls using fairly simple discounting are huge.

Matt
Thu, 03/07/2019 - 10:02am

Mr. Page is correct the employee members never and any idea how pensions work but the unions that negotiated these pensions did and should have been watching and demanding that the funds were deposited as required. The unions were too busy politicking and with other demands so they did nothing. It is time that the members held their unions responsible for this negligence.

David W.
Thu, 03/07/2019 - 12:03pm

I always hate to enter the debate on one of these 'hot button' issues. It seems pretty much that minds are made up and as long as the consequences pointed out in the article are happening to someone else, all is OK.

It is my belief that when two parties make a contract, each side is honor bound to live up to the contract. To blame one side for the other side's failure to live up to the contract is like blaming the home owner for a break-in. After all, is it not the responsibly of the home owner to safe guard his/her property.

Tough Love
Thu, 03/07/2019 - 3:04pm

Quoting .................
"It is my belief that when two parties make a contract, each side is honor bound to live up to the contract. "

That would be true when it's a true "arms-length" negotiation with each side TRULY representing their sides best interests.

And we BOTH know that the Taxpayers were betrayed in such "negotiations", with NOBODY at the bargaining table looking out for THEIR best interests.

Taxpayers have MORE THAN sufficient justification to refuse to honor such "contracts".

Anonymous
Fri, 03/08/2019 - 12:49am

I believe that simplifying the issue/problem is valuable to clarify and frame what needs to be address and identifying who and how to approach it.
What you say is what most of us wish were true, but the reality is that the capacity to me historic commitment are no longer probable. The actuarial reality is people are living longer and life styles are more costly and the financial means haven't kept pace with demand, so 'honoring' past commitments aren't possible [and that excludes any considerations of how 'fair' or practical those commitments were].
I am not sure if responsibility for protecting ones property is even a factor in the problem at hand.
Another reality is that all contracts can be opened for renegotiations, especially when both parties are at risk lose if, in the case of the problem at hand, the entity that committed to paying can pay all, towns can be bankrupted and nobody gets paid.
My experience is that as long as there is talk about blame there will be no solution to the problem. What we need are conversation about what might keep all parties whole even though not as comfortable as expected.

Do you think that if accepting lesser benefits would make probably of receiving a lifetime of benefits, 20, 30, 40 more years of collecting benefits, very much greater should be include in the conversations?

duane
Thu, 03/07/2019 - 12:15pm

Mr. Page is no different than all the rest, he only wants to place blame in the name of 'fairness.' It is interesting that he conveniently ignores those whose money will pay for these excesses [in today' environment]. How many of today's taxpayer were even around when the wave of public officials 'generosity' was being encourage by the recipients? So he is effectively blaming' them by not recognizing the burden, on them.
Experience has shown time and again, placing blame neither prevents a reoccurrence of a bad situation/event or a viable solutions that provides value to all parties.

Reality, we can't change history, no matter who offered or who asked or who approved what got us to where we are. Instead of placing blame there should be a conversation about where we are and how to change so the new program provides the beneficiaries a stable [they can have confidence that it will be financially viable for the long-term] set of benefits and the paying organizations will be fiscally viable.
We need to remember the extremes, towns go into bankruptcy and a judge ends the benefits programs [without negotiations] or benefits don't change and towns have no money to maintain and improve the towns. Things have to change, if nothing changes all will suffer.

Billhilly
Thu, 03/07/2019 - 12:48pm

Why should Joe Taxpayer be responsible for fulfilling a promise to a select group of workers - management and labor - who conspired to create a system that all knew was a house of cards? Easy to say they should have been fully funded years ago but that simply means labor would have had to agree to lower wages then to fund their future pension. Labor threatens a work stoppage, their enablers in media and politics scream, and management caves. Result was higher wages, great pension, kick can down road. Throw in unionized government employees, 95% of whose campaign cash goes to Democrats, and the will to squeeze labor to kick in a bigger share of their pension liability is non-existent. This system is rooted in the swamp - D.C. and Lansing - and there simply aren't enough courageous politicians to fix it, although Snyder and clan made an honest effort, and look what it got 'em.

Tough Love
Thu, 03/07/2019 - 3:08pm

PERFECT response ............ and right on the money !

Jerry
Thu, 03/07/2019 - 1:42pm

Maybe the picture would be different if the taxpayers were at the table to negotiate pay and benefits. Taxpayers are on the hook for funding them.

Anonymous
Thu, 03/07/2019 - 5:35pm

I have reviewed the comments and will try not to repeat myself:

again my central theme is that the retiree has performed the service and is awaiting payment for a written promise. put yourself in his or her shoes.
most of these promises were made at a time when there was no concern about the bankruptcy of a city or county. rogers city cannot really be sold at auction and move its operations to mexico. the private sector is a totally different matter. after studabaker went out of business with its large unfunded pension liabilities - private sector unions pushed for ERISA (1974). ERISA is a private sector pension insurance protection concept where employers pay an annual premium to create a fund to protect pension benefits when a plan terminates without assets adequate to pay basic benefits. that was 45 years ago. perhaps those long gone city council or county board members never heard that story or never heard of ERISA--but their staff sure did: the city or county manager, the chief account, the city county tresurer, the human resources manager, the benefits consultant, the plan actuary, the city or county attorney ---etc. After litigating many of these cases and taking deposition from such support staff (always our best witnesses for the retirees), the practice was to lay out the options to the elected officials - pay as you go or start some level of funding now. once again the typical response to those options was --what is our legal duty? when advised that funding as the benefit accrued was "only" a sound or best practice then, the decision makers invariably thought that kicking the can was a no-brainer. defiling their graves and taking down their pictures in public buildings won't "fix" the problem now.

that's why I also pointed a finger at the state for not requiring disclosure or threatening penalties for lack of funding until 2017.

I don't have the solution. I just want to go on record that unrepresented public employees and represented public employees did not "collude" or "conspire" to create this problem.its. In the union setting, you may be surprised to learn that collective bargaining involves the attempt by unions to improve wages and benefits. (I will never forget a deposition of a senior vice president of one of the Big Three who was asked by why the employer gave a particular benefit to the UAW. He came out his his chair yelling and pointing at me - "we never "gave" those bastards anything. we always started bargaining with our take-aways! the UAW knew our cost and profits as well as we did. they "took" it from us because that was what they were supposed to do".) public employees cannot strike and employers can say NO! All too often the public employee union gave up other demands (like wages or better working conditions) to achieve retirement improvements. We often had problems with employee ratification since many had only one question - how much more did you get in my pay check? Every collective bargaining agreement is ratified by the elected public employer's governing body at an open meeting with public comment available. Where were you?
if the "solution" to the failure to properly fund (a management decision), is to be borne now mainly by the retiree, then the obvious consequence is that many will have to retire later or alternatively pressure congress to dramatically increase social security and medicare. defined contributions plans are cheaper for employers and I understand that - controlling labor costs is the program for every employer in bargaining. - but putting less money into retirement plans means that retirees will necessarily suffer. yeah i am biased. i do not think that is a good solution.

Tough Love
Fri, 03/08/2019 - 8:58am

Quoting .............

"my central theme is that the retiree has performed the service and is awaiting payment for a written promise. put yourself in his or her shoes."

As a Private Sector Taxpayer, my view is far different. What I see are Unions "negotiating" with Elected Officials (or their Management representatives) where:
(a) NOBODY at the "bargaining table" is looking out for the Taxpayers best interests. Of course that's NOT the Union's job, but it SHOULD BE (but never has been) that of the Elected Officials or Management
(b) Elected Officials & Management participate is in the same or similar pension & benefit Plans and would be harming themselves financially if they took a hard stand for reform. As for Management, the bigger the rank-and-file raises, the bigger THEIR raises.
(c) Elected Officials have as goals 1, 2, and 3 to simply to be re-elected, and Unions have made it VERY clear to them that if they don't support their agenda, they will work tirelessly to get them out of office.
(d) Although both the Elected Officials & the Unions would label them otherwise, the COLLUSION between the Public Sector Unions and our Elected Officials is VERY CLEAR, with the former BUYING they favorable votes of the latter (on public Sector pay, pensions, and benefits) with BRIBES disguised and campaign contributions.
------------------------------------------
The result of the above structure has been the granting of pensions & benefits MUCH greater than necessary (to attract and retain a qualified workforce), just, fair to Taxpayers, or affordable, and that structure (and underhanded deal-making) provides WAY more than sufficient justification for Taxpayers to refuse to fund and RENEGE UPON the 50% to 75% share of such ludicrously excessive pension & benefit "promises" that assuredly would NOT have been granted in the absence of the Union/Elected-Official collusion.

Paul
Fri, 03/08/2019 - 10:12am

I think the solution should be the same one those of us on the Private work side have received. As a Delphi employee and now Pension Guaranty Corporation Fund beneficiary my 30 and out was thrown away, my expected Pension cut almost in half due to my being in my middle 50's, and my Health Care was gone. If I understand the quest is for equal treatment via ERISA standards then whats good for us private taxpayers that funded those great benefits given government workers should be also be applied equally. As you point out just because Government entities like Rogers City cannot disappear per Bankruptcy does not mean the state or taxpayers has to cover 100% of their over exuberance. They don't for those of us who did not win the government job lottery.

Tough Love
Fri, 03/08/2019 - 11:36am

Well Stated .................. and let's START (with just the 1-st of many necessary reform steps) with bringing ALL (including all CURRENT) Public Sector worker FUTURE-service pension and benefit accruals accruals down to the generosity level typically granted Private Sector workers .............. that, MOST OFTEN being a 3%-of-pay employer (Taxpayer) DC Plan contribution and ZERO (yes ZERO) towards retiree healthcare.

Kevin Grand
Fri, 03/08/2019 - 7:29am

Here's a thought to consider for this discussion: Why is it that people who "promised" great returns on their retirement (i.e. Bernie Madoff & Charles Ponzi) were thrown in prison for their duplicity, yet the elected officials and union leadership who agreed to and signed off on these benefits without a care in the world on how they will be fulfilled are allowed to walk away scot-free?

Tough Love
Fri, 03/08/2019 - 10:02am

Why ?
Because ........... Elected Officials (many in Legislative bodies) make the laws.

If we REALLY want to stop the Union/Politician collusion (the ROOT CAUSE of the pension mess because of the ludicrously excessive pension & benefits that have been "promised") we need to make it a serious crime for a Union to (directly or indirectly via say a PAC, or via reduced dues to members who contribute) make Campaign contributions, or for a someone running for Office to accept ANY money sourced from a Public Sector Union.

Kevin Grand
Sat, 03/09/2019 - 7:40am

Just because you help to write , pass or enforce the laws, doesn't make you exempt from them.

Just ask Bret Harris, Dean Reynolds, Monica Conyers, Kwame Kilpatrick Mark Hackel or Dino Bucci (and this is just my short list).

Granted it takes far too long for prosecutors to do their job, but fraud is fraud.

And no, I wouldn't object to seeing a few county prosecutors or even an attorney general on that list as well.

Joe Herzrent
Fri, 03/08/2019 - 9:30am

Public employee unions traded sound funding that would have made plans more secure for more salaries and benefits in the present. Same thing with the Teamsters. Then some, like Detroit, managed funds poorly by paying kickbacks to cronies and having trustee seminars in Hawaii. Now they want the money that could pay for roads. The legislators who bought their votes may be responsible, but they are not collectible. The aquifer of money is running dry and the citizen taxpayers should not be bilked again.

Matt
Fri, 03/08/2019 - 12:44pm

The unions were pushing for higher pay along with other wishes the whole time their pensions weren't being funded, what explains this?

Tough Love
Fri, 03/08/2019 - 6:45pm

Because the increased pay was "in the immediate" and acted to further increased their promised pensions. As for the pensions ........... no matter how generous or excessive, they always felt that the Taxpayers could be "FORCED to pay for them ........ in full.

Hopefully and justifiably, for the betrayed and beleaguered Taxpayers, they will be proven wrong

Dave Wolf
Fri, 03/08/2019 - 12:18pm

This kick-the-can-down-the-road approach is sadly the result of big business and government bean counters "creatively" finding ways to avoid paying for things that are known to be coming due. Like an insurance policy, a pension's cost must be based upon actuarial figures. When a business or government entity enters into an agreement, it is only right that they budget for those future actuarial costs to provide what they agreed to, pre-funding for those known liabilities. To not do that is, in my estimation, taking on a calculated risk that they feel that they can later weasel out on. Kind of like the Donald-Trump business model of not paying bills that come due. That is either gross mismanagement or theft.

True to form, in an eleventh-hour move, the Snyder administration and its GOP acolytes rammed through a TOTALLY NEW TAX on pensions - hurting current and future retirees even more - all to give a bonus to corporate interests. While Governor Whitmer has pledged work to reverse that sham, current retirees are still burdened. We negotiated in good faith throughout our careers, trading spendable wages for future retirement benefits. We were constantly reminded during those negotiations that our pensions would never be subject to Michigan income tax, thus our demands were always tempered with that in mind. Then the rug got pulled out from under us after we were no longer able to negotiate changes.

It is not the employees' fault that corporate and governmental entities failed to fund what they promised to pay. As a taxpayer, I understand the governmental issue, but the bill must still be paid for what was promised and contracted for. It is tragic that some attempt to hold retirees accountable for the misdeeds (whether intentional or otherwise) of those who pledged to provide those pension benefits.

Tough Love
Fri, 03/08/2019 - 5:04pm

Quoting ............. "We negotiated in good faith throughout our careers, trading spendable wages for future retirement benefits. "

Well, as a Taxpayer I beg to differ. What I have seen FOR DECADES is nothing but BAD-FAITH "negotiations", with NOBODY at any negotiating table EVER looking out for the best interests of the Taxpayers .... something that those negotiating with the Union SHOULD HAVE done.

Not surprised though, as the management representatives are in the same or similar pensions and get as good or better benefits, and were certainly not going to push thru "reforms" that would likely impact THEM as well as the rank-and file.

It a rigged system, with the Taxpayers being treated as the "sucker" in the room, and there is WAY more than sufficient "justification" for Taxpayers to NOT fund and to RENEGE on a LARGE portion of the absurdly generous Public Sector pensions & benefits that have be "promised"

Paul
Sat, 03/09/2019 - 2:51pm

Again is it less "tragic" for us Private Pension recipients. Lets review, your government pension is probably something like 1.5% times the number of years you worked, usually with no limit and never mind the add-ons many contracts provide for overtime, unpaid vacation and sick time, so that many retire with 60% or more of their pay. We won't discuss the mechanizations that sometimes enable workers to almost equal their pay. With the exception of the UAW and a few others, and we know what happened to them in 2008, at a Private employer if you are with one of the remaining 25% of employers that provide a pension you get at most 1% times a max of 35 years, ie: for a grand total of 35% of your working pay. I once had to listen to a former Federal worker complain that he did not get social security so he had to work a few more years so he could qualify for only 85% of his salary in retirement. Is it any wonder after we have absorbed the hits of bankruptcy and other adjustments that we taxpayers are not enthusiastic about making government retirees whole.

Paul
Sun, 03/10/2019 - 2:11pm

Apparently it is not "tragic" that those of us in the Private Sector have no government supporters trying to get us what we were promised. The PBGC Pension Guaranty Fund averages less than 60% of what Private Pensioners are promised. Lets review, Government workers usually get 1.5% of their salary times the number of years worked, usually with no limit. So for 40 years thats 60% of pay and that does not consider the contractural mechanizations like accrued sick pay, vacation time, or overtime that can see it add up to far more. With the exception of some UAW workers and other luckies, of the remaining 25% of employers that offer a pension, they generally provide up to 1% of pay for a maximum of 35 years, for a grand total of 35%, period. And health care, better work til your Medicare eligible cause forget that anymore. So if I'm lucky with my full Social Security I might get to a combined 60% of my pay, but of course I am expected to have been saving into my own retirement plan too so I hope I didn't forget that. Had a conversation once with a poor Federal employee who complained that he did not get any Social Security so he was going to have to work for 40 years so he could get only "85%" of his salary when he retired, Poor guy. Is it any wonder we Private workers, who have funded these wonderful benefits for the Government beneficiaries have no patience for their claims, "we deserve it because a Promise is a Promise".

Tough Love
Mon, 03/11/2019 - 11:43am

Paul, I don't know how (or from where) you are coming up with ............... "your government pension is probably something like 1.5% times the number of years you worked," .............. but that's not correct, being considerably BELOW most Public Sector DB pension Plan "formula-factors".

Other than for some very recent changes for NEW hires in a few States, most non-safety worker DB pension"formula factors" center around 2% (not 1.5%) per-year-of service, and most Safety-worker (Police, Fire, etc.) DB Pension Plan formula-factors center around 2.5% (with some at 3%).

Combine the above, MUCH more generous "fiormula-factors" than what the few non-frozen Private Sector DB Plan provide, with an age often 10 years younger at which an unreduced pension can begin being collected, and with COLA-increases (unheard of in Private Sectoer DB Plans), and it easy to see how Non-Safety-worker Public Sector Plans are TYPICALLY 3 to 4 TIMES more "generous" (and hence more "costly") than those granted comparable Private Sector workers who retire at the SAME age, with the SAME wages, and with the SAME years of service .............. AND with that 3 to 4 times rising to 4 to 6 TIMES for SAFETY-workers with even RICHER pension formulas and provisions.

Such VERY VERY VERY rich Public Sector pensions (and equivalently rich retire healthcare benefits, almost NONE of which Private Sector workers get any longer) are patently absurd. And even MORE SO when one factors into the discussion that ALL of the Public Sector worker's own pension contributions (INCLUDING all the investment earnings thereon) accumulate to a sum upon retirement RARELY sufficient to buy more than 10% to 20% of those very rich pensions, with Taxpayer contributions (and the investment earnings thereon) responsible for the 80% to 90% balance.

Boiling
Mon, 03/11/2019 - 11:24am

So look at the Public Safety sector. The pool of potential employees has dried up. Where hundreds of applicants came looking for work have dried up to less than a hundred. If they offer a pension, the pool is larger. Its no fault of the Paramedic, Police Officer, or Fire Fighter that they retire around 50. Do their job, see what toll it takes on them! The auto worker isn't much different. They stand for hours and do the repetitious task it takes to build a car, this ages their body prematurely, they deserved to have their retirement age bargained lower. Taxes are going to be paid to catch up, but watch your politicians, because when they catch up, I bet that they will not roll your taxes back.

Tough Love
Mon, 03/11/2019 - 7:11pm

Baloney.
All just "excuses" to try to justify the ludicrously EXCESSIVE (and hence ludicrously COSTLY) pensions & benefits now granted Police Officers.

duane
Tue, 03/12/2019 - 11:56am

Now that all the finger pointing/blaming has run out of wind, let's get to whom ever wrote the question that open this article; "Why does ‘fixing’ Michigan pensions stick it to workers?"
They should have asked Willie Sutton and his answer would have been the same as when asked why he robbed banks, “Because that's where the money is". To cut pension spending then the workers’ pension benefits have to be cut, there is no other cost to cut.

Tough Love
Tue, 03/12/2019 - 1:04pm

Yes, but it's ALSO because the Taxpayers were very clearly betrayed by their Elected Officials, Officials who SHOULD HAVE been looking out for the best interests of Taxpayers, but instead betrayed them by granting unnecessar/excessive pensions & benefits in exchange for campaign contributions and election support.

Fixing it must included "righting-that-wrong", and THAT means very materially reducing these unjust and unaffordable pension/benefit "promises",

duane
Tue, 03/12/2019 - 5:46pm

"Why does ‘fixing’ Michigan pensions stick it to workers?"

Bank robber Willie Sutton had the answer, “Because that's where the money is". Worker pension benefits are driving the money problems, so reducing those benefits is where the money is.

leonard page
Wed, 03/20/2019 - 8:13pm

let's separate some facts from opinions. The Supreme Court (Steel v. Louisville Railway) ruled a long time ago that where a union is certified to represent employees in bargaining with an employer, the trade off is that the union must fairly represent all employees in that unit. (no one else) employees elect their bargaining representatives and unions must make extensive financial disclosure as to how dues income is spent. unions have absolutely no legal duty to represent taxpayers. taxpayers elect local, county and state leadership who must ratify tentative agreements negotiated by their professional staff. retirement benefits have been negotiated by public employers and union for at least 60-70 years. I have been involved in such negotiations and resulting disputes for about 40 years. I have spoken at or attended numerous conferences on retirement benefit issues. I am not aware of a single occasion where a public or private employer offered to bargain about the funding mechanism for deferred compensation. the uniform response, unless you had the muscle to force the point, was the benefit had been negotiated and is in the contract - thus the employer will comply with whatever state or federal funding standards are currently required. the failure to adequately fund while the employer avoided turnover and received the workers' service for the past 60-70 years is terrible but trying to make current retirees now pay again by taking retroactive cuts is plain wrong. moreover, the current prospective "remedy" of eliminating pension and health insurance, means future generations will work longer or try to get by on medicare and social security.