Policy Research

Funding the Legacy. The Cost of Municipal Workers Retirement Benefits to Michigan Communities

Eric Scorsone, Nicolette Bateson

Summary

The authors assessed Other Post Employment Benefit (OPEB) liabilities across all of Michigan’s cities in 2013. OPEB “is the term used to describe benefits promised to retirees and earned during their years of service”. They found the total liability as of 2013 was $13.5 billion. At the time, Detroit had a liability of roughly $4 billion. For the 98 units that provided total plan participant information, the average liability per member was $136,854. Most providers of OPEB benefits were cities, with a few counties and townships included. The annual required contribution for OPEB benefits is on average 3.18 mills. Finally, in some municipalities, OPEB liability is higher than unfunded pension and government bonded debt combined.

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Policy Implications

Healthcare costs for retired employees continue to cripple municipalities. Lawmakers in the State of Michigan and across the nation should consider state options to addressing the problem. In the State of Michigan, the problem is already pressing, and Michigan is not alone in this respect. One of the greatest costs to cities over the next several decades across the nation will be OPEB benefits. It is important for states to recognize this potential debt, and the implications of restructuring this debt on a financial and employee level.