For local governments, the monster under the bed has long been the unfunded mandate, the ever-growing debt most governments big and small owe to employee retirement and health care funds.
For about as long as public employees have negotiated for retirement benefits, local governments have been borrowing against the day when they would have to actually pay what they owe — and pretty much refusing to think about it, much less talk about it in public.
Just having a conversation about how to get out from under is a big step forward, and Grand Traverse County administrator Dave Benda deserves credit for throwing out a plan to do just that.
While it’s still too early for any decisions about Benda’s plan to issue millions in bonds to pay off retirement and health care debt, the idea of being debt-free is appealing. The county currently spends close to $4 million a year on pension costs. Officials estimated about a $1 million shortfall in the county’s 2014 budget.
As Benda has laid it out, the county would issue $52 million in bonds and use the money to either pay off its unfunded liabilities directly to the Michigan Employee Retirement System and a retiree healthcare trust in lump sums, or invest the money and pay unfunded pension and health care costs with those investments.
Right now, the county owes nearly $45 million to its employees’ pension fund and approximately $6 million in employee healthcare liabilities; the healthcare total is based on 2010 figures.
County Commissioner Christine Maxbauer, who cast the lone vote against publishing a notice of intent to issue bonds, the first step in a long process, said the county would be gambling with taxpayer money and trying to borrow its way out of debt. She likened it to “financial roulette.”
Commissioner Larry Inman said he wants more information, including MERS officials’ reaction to the bond proposal, and an update on unfunded healthcare costs. “I don’t want to end up like the next septage plant, saying ‘we thought we were going to get a return on this,’ “ he said. Who wouldn’t second that motion?
A major problem with the septage plant was there was virtually zero accountability. Claims about how much business the plant would do went unchecked, its design was accepted at face value, and its construction didn’t meet professional standards.
Paying off retirement and healthcare debt could prevent layoffs and service cuts and save county taxpayers an estimated $17.5 million over a 15-year bond schedule, officials said.
And sooner or later, the county is going to have to pay off that debt.
Benda’s proposal is certainly worth talking about and worth undertaking an exhaustive examination of the facts. Until then, it’s just talk.