An infusion of $220 million into the city’s coffers from the State Treasury will give enduring relief to the city’s finances. On July 6, Mayor Sheldon Neeley announced the City of Flint will receive $220 million from State budget allocations to fund the city’s pension costs. That allocation is part of the State’s $76 billion budget Governor Gretchen Whitmer signed July 1.
In recent budget hearings the City’s CFO Robert Widigan has detailed a desperate picture of the city’s underfunded pension fund. Widigan has told the City Council an annual pension payment of $32 million was projected to expand to $40 million in FY2024. With the lump-sum $220 million infusion from the State the city’s annual payment will be reduced to between $18 and $19 million, according to Widigan.
With the additional $220 million from the State Treasury, the city will be able to allow critical city services to continue, Neeley explained. Without the infusion of State funds many critical services would be affected because the city would be required to pour funds into the mandated pension payment. CFO Widigan explained that the city has “a moral” and “a constitutional mandate to fulfill our promise to retirees.”
“Today is a historic day in the city of Flint. As a result of the hard work and dedication of many, the City of Flint will receive more allocated dollars from the state budget than ever before in its history,” “Neeley stated, when the payment was announced in July. “We will also see several community-based organizations in Flint receive funding including Berston Field House, St. Mark Missionary Baptist Church, and the Boys and Girls Club.
“In the coming days, weeks, and months, Flint will begin to address our pension fund deficit as well as utilize dollars in other principal areas of our city budget for the benefit of our community. “This administration continues to meet and exceed priorities set at the start of my tenure and we will continue to set an agenda for the future for the betterment of the great city of Flint” Neeley said. “I want to thank our governor, Gretchen Whitmer, for her continued support of Flint.
I would also like to thank the Flint delegation – Senator Jim Ananich, Rep. John Cherry, Rep. Cynthia Neeley. Without support of these and other partners, the City of Flint would have likely been solvent, ” said Neeley. “Their commitment to Flint is a true reflection of the power of partnership in our community. I am proud of the partnerships we’ve built to move our community forward,” wrote Mayor Sheldon Neeley in a press release.
The city needs a “boost” – CFO Widigan
The City of Flint has been plagued by a $400 million deficit in its pension fund. CFO Widigan has been saying over the last few months in budget hearings with city council the city needs a “boost” and the city of Flint is headed towards “insolvency.” In a June budget hearing Widigan warned, “However, if pension costs continue to rise as forecasted in FY2024, the city is projected to see a deficit of $15 million.”
Currently the city has 1,700 pensioners and beneficiaries. Widigan said the city knows of current year pensioner deaths but does not keep a tracking sheet of the number of deaths over the years. The pension contribution cost has appeared to increase each year but Widigan explained that is due to multiple factors including funding ratio, market returns, along with changes in assumptions and demographics of the retirees change. In 2012 the city stopped offering pensions for new city hires.
There are still city employees that are working who remain on the old pension system. Hurley Hospital employees, the city’s hospital, are on their own pension system, according to CFO Widigan. Retiree health care is not factored into the pension. According to the city the pension and health care are separate. There are no annual actuarial valuation reports completed each year on the pension fund attrition.
Over the last 10 years the city has contributed the bare minimum payment to the pension fund, an amount determined by MERS (Municipal Employees’ Retirement System of Michigan). An independent, professional retirement services company, MERS of Michigan was created to administer the retirement plans for over 100,000 participants throughout Michigan’s local units of government on a not-for-profit basis, according to the MERS website.
“This drastic increase [of pension payments] makes pension contributions our most significant expense in the city budget. The outcome of these challenges is that the City of Flint faces an ongoing structural General Fund budget deficit of a $14 million reduction to fund balance in FY2023.“This continues to grow to a $20 million reduction to fund balance in FY2024. In FY2023, we address this structural deficit with the use of some one‐time fixes available to use due to poor accounting practices from the past. However, this does not fix the overall problem, and in FY2024, we are still projecting a significant deficit in the General Fund,” Widigan said in an email response to EVM.
Reps. Cherry and Neeley, State Sen. Ananich help Flint to be included
“There have been long term negotiations on reaching a deal to help municipalities, including the city of Flint, manage the unfunded liability pension funds, Cherry told EVM at a July press conference. Cherry explained earlier legislation that began in the State House of Representatives “helped everyone else [in Michigan] except the City of Flint. And that’s not fair.”
“So the work that I did was to really try to make sure that the House version did not pass and become law. Because it would have been very difficult to sell to the City of Flint because it solved everyone else’s problem but not the City of Flint’s problem.” Cherry explained that he worked to stop the initial House bill that did not help Flint and “I worked to create opposition to it.”
Both Rep. Cherry and Sen. Ananich complimented the other for their “crucial” work on getting this legislation passed. EVM spoke to Rep. Cherry in-person at a press conference and to Sen. Ananich in a phone interview.
According to AFSCME (American Federation of State, County and Municipal Employees) President of Local 1600, Sam Muma, The union’s involvement has been to “work with the Lansing people to understand our concerns.” To continue to make a payment of $40 million per year towards the pensions it’s a big deal when it comes to day-to-day operations. The reduction of $20 million annual payment into pensions will allow the City of Flint to use those funds for essential city services.
“The EM [Emergency Managers] kicked the bucket down the road.” Muma suggested that the Council and the City bring MERS back into negotiations to be able to rework the amortization numbers in light of the payment.
Widigan, “We are constantly working with MERS to find ways to make the city’s annual payments more realistic. We will both come back to the negotiating table to see what can be done after the $220 million is made available from the Michigan Treasury.”
EVM Managing Editor Tom Travis can be reached at firstname.lastname@example.org