State Rep. Beau LaFave of Iron Mountain today voted in favor of reforms to help protect the retirement benefits of police, firefighters and other local government employees.
The legislation approved by the Michigan House will help identify local governments most at risk of bankruptcy or severe financial hardship due to underfunded retirement plans. The legislation sets up a system to help guide local governments to solid financial footing, so they can continue to pay for promised retiree benefits and public services.
“The last thing I want is a federal bankruptcy court to cut retiree benefits, like what happened with Detroit,” LaFave said. “This plan will shine a spotlight on the financial health of local government retirement plans and help preserve benefits. It provides a framework to allow locals every opportunity to assess and improve their own budgets. That’s the best way to preserve retirement benefits for police and firefighters, and protect funding for public services.”
Michigan’s local government employee retirement systems have unfunded liabilities fast approaching $20 billion, including a surprising amount in the Upper Peninsula. The legislation working its way through the Legislature aims to help communities improve their plans’ finances.
The plan is identical to recommendations from a task force assembled by Gov. Rick Snyder earlier this year, which enjoyed broad support of local governments and police and fire unions.
The legislation creates a reporting system with uniform, realistic financial and accounting standards for local government retirement plans. An early detection system will help identify potential funding problems and allow local governments to act quickly to mitigate them. Communities will be vetted through a state treasurer’s fiscal impact evaluation and retirement systems will be flagged as underfunded when municipalities aren’t meeting set criteria to alleviate their debts.
“We want local governments to have the opportunity to fix things on their own, without the state or federal government coming in on their high horses and forcing changes down our throats,” LaFave said. “I believe in shining a light on these systemic problems and helping communities make their own changes when they’re needed.”
House Bill 5298 and companion legislation advance to the Senate for consideration.