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Political roundup: State considers seizing control of local government pension funds

Dec 1, 2017

The state legislature is weighing a package of bills that would allow the state to intervene in cities that fail to sufficiently fund pensions.
Credit Lester Graham / Michigan Radio

The legislature is considering a package of bills that would give the state power to step in and manage a municipality’s budget if the local government doesn’t have a way to fully fund pension plans. That’s a little more heavy-handed than a five-step plan a governor’s task force recommended.

Vicki Barnett, a former mayor of Farmington Hills and a former Democratic legislator, and Ken Sikkema, senior policy fellow with Public Sector Consultants and a former Republican majority leader in state senate, joined Stateside to discuss the package of bills.

Listen to the full conversation above, or read highlights below.

On the history of the pension problem

“It’s a historic problem of cutting taxes,” Barnett said. It’s also a problem, she continued, of cities and people paying as they go for benefits without planning for the future and without concern for budgetary impacts. “A lot of cities and local governments and states as well played loose and fancy with the paper funding,” she said. Sikkema, who said the issue never came up during his 20-year tenure in office, from 1986 to 2006, believes that the Great Recession is behind the current debate.

On support for and opposition to the bills

We must “give credit to [Governor Rick] Snyder and the legislature for how they’ve approached this,” Sikkema said. The legislature has responded to a problem the task force has identified by creating legislation with the goal of correction. “At the end of the day, this problem has to be solved. It’s not going away. And, at the end of the day, it’s the retirees themselves who suffer the most if it isn’t solved,” he said.

Barnett disagreed, noting that the bills’ processes would not solve the problem. Under the bills, Barnett said, if a city does not sufficiently fund pensions, a financial management system can require more contributions by employees and could require employees going on Medicare once they turn 65. “So it really takes a lot of the negotiating parts of contracts out of the hands of local government,” she said. A number of police and firefighters sided with Barnett, protesting at the state Capitol this past Wednesday. 

On whether citizens should have a say

Both Barnett and Sikkema believe that the public should have a say on the matter. “The public has spoken very clearly on this issue of emergency managers and the state stepping in with such a heavy hand,” Barnett said. But Sikkema also believes that there are exceptions to the rule. “There are going to be occasions where the state is going to have to step in, hopefully limited, because a local government cannot or will not solve this problem,” he said.

Ken Sikkema and Vicki Barnett join Stateside every Friday to break down the week’s political news.

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