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Retirement Statement

Posted by: POLC Staff Posted date: September 18, 2017


The below is a statement released by MAPO who represents the POLC/GELC on the Governor’s Responsible Retirement Reform Task Force and other legislative concerns.   It is being released to media outlets as our official statement on the Task Force Report.   We stand ready to monitor what is going on in Lansing and will keep all POLC/GELC Members updated.

 

On July 18, 2017, the Governor’s Task Force on Responsible Retirement Reform issued a report dealing with the unfunded liabilities related to public employee retirement. This report was the work product of months of meetings and deliberations by those appointed by Governor Snyder to serve on the Task Force.

Representing the POLC/GELC and Michigan Association of Police Organizations, I voted to endorse the final report. I was the only active certified law enforcement officer to serve on the Task Force.

I endorsed the report because of two main factors:

1. Recognition that there is not a one-size-fits-all solution

2. Identification of a multi-step process for identifying struggling units of government

While supportive of the report, I believe there are other factors to be considered as the Michigan Legislature contemplates a legislative fix.

First, the West Michigan Policy Forum report that created the heightened interest amongst policymakers made certain financial assumptions that made the problem greater in scale than it is in reality. Specifically, the report assumed a rate of return of 5.5% for pension funds. Governor Snyder has chosen to have pension funds controlled by the State of Michigan use an assumed rate of return of 7.5%. This lowered assumption by the author of the West Michigan Policy Forum added billions of dollars to the report’s final tally of unfunded liabilities.

Second, the Task Force talked about revenue constraints but acknowledgement of the dramatic reductions in revenue sharing payments to local government received short shrift in the report. For instance, since 2000, the gap between legislatively authorized funding for revenue sharing and actual funding is approximately $8.5 Billion. If 20% of that funding gap had been dedicated to retirement benefits, the amount targeted to addressing the unfunded liability would have exceeded $2.75 Billion.

Third, another factor to be considered is the lack of Social Security benefits for 77% of Michigan’s police officers and fire fighters. Historically, retirement security experts have identified three legs to the retirement stool: Social Security, Pension and personal savings such as a 401k savings plan. More than 17,000 Michigan public safety officers are missing a crucial leg of the stool without the Social Security benefit. Local units of government save more than $50 Million annually because of avoided employer contributions to Social Security. Recently, the financial and human resource professionals responsible for the creation of the 401k system have stated it was never intended to be the sole source of retirement income. Current proposals in Washington as part of the tax reform effort include taxation of 401k savings. This is another attack by policymakers on the benefits that police officers earn everyday doing a very tough job.

Law enforcement is a profession not conducive to long careers. The physical and emotional demands of the job are factors that contribute to the normal 25-30 year career as opposed to the 40-plus years of service in other careers.

The continued diminishment and attack on law enforcement benefits is not without consequence. Many of the policymakers attacking pensions and health care for police officers claim to be advocates of “the free market”. What they fail to recognize is that free market principles apply to the labor market as well and the reduction in benefits is the main contributor to the widely recognized increase in the difficulty of recruitment to the law enforcement profession.

The reality is that law enforcement labor groups are not blind to certain financial realities. The majority of police departments across the State of Michigan no longer offer retiree health care to new hires. Employee contributions to their benefit plans have increased dramatically in the past ten years.

The Michigan Association of Police Organizations believes any changes to retiree benefits for police officers should not simply shift the burden to the employee. Employers and the financial service industry need to be held accountable for their significant share of the blame for the current situation. Solutions are out there if all parties approach the problem with a commitment to real numbers as opposed to assumptions that further an ideological bent.

The members I represent stand ready to work with those who recognize the value our police officers contribute to our communities.

I am proud to work everyday on behalf of the men and women in Michigan law enforcement.

Michael Sauger
MAPO President

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