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Opinion: Public pension issue

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By Jack Minore

Thursday, July 29, 2010

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There has been much discussion in the news recently about public pensions — most of it growing out of the California town with the $800,000 city manager and part-time council members at nearly the same salary. Those salaries are outrageous. But the news coverage seems to suggest that all public pensions are overly generous.

Flint and Michigan have, over several years, taken steps to curb the pension expenses.  Teachers, for example, contribute a portion of their salary to the pension system, and they still have a fairly modest retirement income. Top paid teachers, with 35 years of service, having paid $2,000 per year into the system before retiring, will retire with less than $3,000 per month and have substantial medical contributions taken from that amount. Most state pensions are comparable and city retirement is somewhat more generous in many cases.

In Flint, there was a clever little "catch" that many employees were able to use. Most retirements are based on three factors — average final salary, years of service and a "retirement factor" that generally varies from 1.5 percent to about 2.25 percent. Employees would save all of their vacation and leave days — take the money for them in their final year and inflate their final salary. That was halted or "capped" under Mayor James Sharp and the inflated pension practice was halted for all employees hired thereafter.

(I'm proud to have been part of halting that "gimmick.")

Let's look at how those factors work. I'll use the teacher system since I'm most familiar with it.

A teacher has 32 years of service. Final (three-year average) compensation of $62,000 and the retirement factor for teachers is 1.5 percent. So $62,000 times 32 times .015 equals $29,760 base pension. Survivor benefits, taxes and medical coverage are deducted. The take-home pension would be about $2,000 to $2,100 per month — hardly a "windfall."

State pensions used to be "pre-funded." That is, the state put an amount estimated to be needed for future pension pay-outs into a "savings account." The amount was based on actuarial figures that included anticipated market value, life expectancy, age of the workforce and other factors. That "great conservative," John Engler, halted the practice and used the money to pay for his tax cuts. That, of course, left the state in the future (now) in much poorer economic condition. In short, a sound "pay as you go" system was traded in for "future debt."

State legislators, by the way, elected after term limits went into effect, are not part of any pension system — though they can save from their own salaries in a state-sponsored 401 private savings account and the state will match three percent of salary for that system.  Flint City Council members are in the same situation. They are not part of any pension system, but they can save in a private 401 plan and the city will provide a match.

A word about health coverage for elected officials. Many have health care paid for or partially paid for while they are in office. For most public employees, that coverage ends when they leave office, or 90 days after. The news coverage has often talked about "lifetime" health care for former legislators. Actually, it's not lifetime, but only until the legislator is eligible for Medicare. Still a generous benefit, but not "lifetime" by any means.

My point in writing this is simple. Flint and Michigan have taken steps to reduce the longterm costs of public employees. Some of those steps were taken years or decades ago. The California stories are horrific, to be sure, but they should not be automatically assumed to represent the Michigan situation.

(Michigan's deficit, perhaps as a result, is less than a tenth of California's.)

Finally, two points. Just for clarification, I want to make clear that I have had adequate health coverage as an educator — both active and retired — so I have never taken any health coverage from any elected position. I have never been part of either a city or a state pension system, but I have been able to save some money in those private 401 systems — not much after the market crash of last year.

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I invite you to e-mail me if you would like to comment, seek clarification, complain, etc. I'm at This email address is being protected from spambots. You need JavaScript enabled to view it. . But don't bother to e-mail me if you are unwilling to identify yourself by name and address, or at least, neighborhood. If you're unwilling to identify yourself, I will delete them automatically. I'm insisting on you identifying yourselves because I really don't want to receive the same kind of "idiot talk" that seems to fill the Flint Journal blogs.) — Jack.

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(Note. I've been writing these occasional pieces for some time now and have never gotten a single comment about any of them. So I invite you to e-mail me if you would like to comment, seek clarification, complain, etc. I'm at This email address is being protected from spambots. You need JavaScript enabled to view it. . But don't bother to e-mail me if you are unwilling to identify yourself by name and address, or, at least, neighborhood. If you're unwilling to identify yourself, I will delete them automatically. I'm insisting on you identifying yourselves because I really don't want to receive the same kind of "idiot talk" that seems to fill the Journal blogs.)

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Jack Minore is a retired teacher, former long-serving city councilperson, former legislator and active in a number of political and environmental groups - notably the Flint River Watershed Coalition and Friends of the Flint River Trail. Jack was in the original group that formed East Village Magazine.

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