Hundreds of Michigan cities are not saving enough to cover their future retiree health care costs.
A new report says more than 300 Michigan municipalities have in excess of $13 billion in unfunded liabilities for health care costs of retired public employees.
Michigan State University researchers found only half of the municipalities are prefunding retiree health care. The rest are setting aside no money despite longer lifespans and rapidly rising health costs.
While the collective bill of funding those benefits is $12.7 billion, the bulk of it, almost $11 billion, is attributable to local governments in a 10-county region of Southeast Michigan including Oakland, Macomb and Wayne counties. The city of Detroit alone will owe $5 billion in retiree health care costs.
But MSU professor Eric Scorsone says cities like Grand Rapids, Flint, Lansing and Saginaw also face difficult choices.
“That’s already happening today….these cities…are paying millions of dollars in retiree premiums so it’s already having an effect and it will have an even bigger effect in the future,” says Scorsone.
Scorsone says the new national health care law may help some. But tax increases, budget cuts or broken promises to retirees are inevitable, unless the state takes action.
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