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Cities, counties owe $7 billion to retirees for healthcare

Jan 31, 2016

Credit photo by Anna Strumillo Phuket - Thailand / www.fotopedia.com

Michigan’s cities and counties have made a lot of promises to their workers about retirement.

But when it comes to healthcare, local governments owe more than $7 billion dollars to retirees – money they just don’t have right now.

Michigan State University’s Eric Scorsone has been crunching the numbers.

“Those promises now have to be paid off over the next 10, 20, 30 years,” says Scorsone, who runs MSU’s Extension Center for Local Government Finance and Policy. “And unfortunately, that’s going to mean either higher taxes, less services, or a change to benefit plans.”

In other words, cuts.

Some cities have already slashed retiree health costs, often in controversial ways, think Detroit’s bankruptcy and the Emergency Managers in Pontiac, Benton Harbor and Flint.

That’s brought retiree healthcare liabilities down from $13 billion in just the last couple years – though Scorsone also credits an improving economy.  

“People should look at it this way, if we can find common sense solutions, to help both retirees and cities get through this, you know, we’re going to free up some resources for critical public services,” he says.

One piece of good news from Scorsone’s analysis, Michigan is at least doing well in terms of keeping their pension promises funded compared to other states.