IM in crosshairs of unfunded liability legislation
IRON MOUNTAIN — City officials are keeping an eye on proposed legislation that may force severely underfunded retiree health plans — such as one in place in Iron Mountain — to undergo changes ordered by state appointees.
The city has received a new actuarial report showing an unfunded retiree health insurance liability of $34.1 million, up from $28.6 million three years ago, City Manager Jordan Stanchina said.
The obligation has grown despite the city’s corrective actions, likely because the cost of health insurance continues to rise above inflation, Stanchina said. City employees who retired before 2008 receive benefits paid entirely by the city, while other retirees pay between 6 percent to 20 percent of the cost, depending on the agreement. Employees hired after 2011 are not eligible for retiree health benefits.
The city’s annual retiree health cost of nearly $1.5 million represents about 17 percent of the general fund budget.
“I’m a little surprised that our number went up,” Stanchina said. “It’s something that is still not going in the right direction.
Under the proposed legislation, a retiree health plan would be deemed inadequately funded if it was not at least 30 percent funded and costs the municipalities more than 10 percent of general fund spending.
“Our retiree health is zero percent funded,” Stanchina acknowledged.
If the new legislation becomes law, communities with significantly underfunded retirement plans would have to submit planned “corrective actions” to a new Local Government Retirement Stability Board comprised of three gubernatorial appointees. If the board rejected the plan or a local government could not agree on a proposal, the state treasurer would declare a financial emergency and appoint a three-person team to act as an emergency manager — with “broad powers” to rectify the underfunded status.
“I don’t know where this is going to end up,” Stanchina said.
Mayor Dale Alessandrini said the retiree health liability has grown over a long period time, something legislators should keep in mind if they believe a quick fix is appropriate. “It took us a hundred years to get there,” he said.
The roughly 340 local governments that provide retiree health care have $10.1 billion in unfunded liabilities, with average funding ratios of 19 percent, according a July report from a task force created by Michigan Gov. Rick Snyder.
Stanchina pointed out that infrastructure is also an unfunded liability. If the state dictates that a particular liability must be solved, other budgetary needs, such as streets, will go neglected, he said.
Council member Bill Revord suggested lawmakers restore “all the revenue they took from us to balance their budget.”
Alessandrini said huge assessment reductions awarded through the Michigan Tax Tribunal are costly as well. He suggested again approaching Kingsford about the possibility of shared police and fire services.
In other action, the council:
— Discussed with Director of Police and Fire Services Ed Mattson the cost of mental health transports, sometimes to downstate facilities. More of that burden is falling on city police, because the Dickinson County Sheriff Department no longer has part-time deputies available for such duties. With two officers generally required, it creates a strain on department staffing, but there are no answers coming from Lansing, Mattson said. “The mental health system is broken,” he said, and police transports are “a big cog that shouldn’t even be there.” In many cases, the person being transported is a patient who hasn’t committed a crime but nonetheless must be restrained en route to a facility hundreds of miles away, he said.
— Agreed to seek a U.S. Department of Agriculture Rural Development Agency grant to help acquire a 4×4 crew cab pickup truck for the fire department. The estimated cost, with detailing and accessories, is $32,000, with the city’s share being about $23,500. This vehicle would replace both a 1997 pickup truck and a 2000 SUV.
— Approved a request from the Iron Mountain Downtown Development Authority to block Ludington Street from Stephenson Avenue east to the first alley from 5 to 6 p.m. Friday, Dec. 15, for the Christmas tree lighting at First National Bank & Trust. A small parade also is planned for 6 p.m. to escort Santa and Mrs. Claus to the downtown stage.
— Approved the Iron Mountain-Kingsford Rotary Club’s request to again conduct its car plunge contest, which involves placing a specially prepared vehicle on the ice in East Chapin Pit and taking guesses on when it will fall through. Permission was granted for two years, as the club holds a Michigan Department of Environment Quality permit for next year as well. This marks the fourth year of the popular guessing contest.
— Approved a new method for collecting health insurance payments from retirees, whereby premiums can be deducted from monthly pension benefits paid by the Michigan Municipal Employees’ Retirement System.