Traverse City Record-Eagle

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April 28, 2012

Lansing must address legacy costs

While the Lansing City Council continues to tussle with Mayor Virg Bernero about how to spend money raised through the millage voters approved last November, the council is ignoring a much larger issue.

Lansing is spending millions on costs for pensions and health care, including health coverage for retirees who now number 1,517, compared to 882 active employees.

Pension costs have risen in recent years as the city has needed to pay more to offset the impact of the 2008 recession on pension investments. And health care costs continue to rise.

At the same time, city revenues have dropped due in part to declining property values and cuts to state revenue sharing. Those same pressures are likely to continue; lawmakers want to eliminate a personal property tax on business equipment and machinery — money that goes directly to local governments. The current proposal does not replace all the lost revenue, another challenge that could hamper future future city budgets.

Voters OK'd the millage last November, specifying 1.5 mills each for police and fire services and 1 mill for road repairs. That equated to some $2.9 million each for police and fire operations. Yet the bulk of that money, some $1.9 million for police and $2.7 million for fire, will be spent on "increased costs" over the prior year. And the largest portion of that is slotted for pensions and health care.

According to budget detail for the police department, fringe benefit costs including pensions and health care are expected to be increase about $1.3 million in fiscal year 2013; that represents nearly 45 percent of the revenue from the new police millage.

It's clear the city is on a trajectory it cannot sustain. For example, city officials told the Editorial Board last week that the annual cost of health care for retirees who are 65 or older — those covered by Medicare — is about $6 million, due to commitments in labor union contracts.

Some council members oppose spending $194,000 on costs to prepare a city owned building to house the police department in the future. That simply should not be their leading concern.

Everyone — including Mayor Bernero, council members and city employee unions — should make pension and health costs a priority. It's time for honest, constructive discussions.

Lansing State Journal

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