Detroit may well be the poster child for municipal pension irresponsibility (though if there were an award for that, it would be extremely competitive). But give credit where it’s due: the Motor City has also been a model for how to dig out of the public pension hole. Kevyn Orr, the city’s Emergency City Manager appointed by Michigan Gov. Rick Snyder (R) in March 2013 to oversee Detroit’s financial operations, has gotten nearly everything right — freezing the plan so current employees are taken out of the picture; resetting payouts based on age, earnings history and tenure; negotiating new pension agreements with the city’s police and fire unions; and taking steps to get taxpayers off the hook if the plan valuation drops.
Though Detroit still faces a tough climb out of the hole, there are tangible signs that it will be successful in the end. At this point, that may not only set the Motor City apart, but it may also give hope to the many other states and cities grappling with pension reform. Here’s a quick rundown of developments in a few locations you may have missed:
- Pennsylvania: Standard & Poor's may downgrade the state’s AA bond rating, Bloomberg.com reports. Part of the reason: State lawmakers broke for the summer without addressing pension costs that are expected to rise by 38%, to $65 billion, by 2018.
- Phoenix: A state judge refused to put the city’s prohibition against pension spiking — that is, artificially inflating an employee’s pay as they approach retirement to “game” their benefit calculation — on hold while a lawsuit by the city’s police union proceeds. That lawsuit seeks to preserve the practice.
- Minnesota: A pension reform debate is starting to heat up over the state’s $17.3 billion in unfunded pension obligations, with a four-part plan unveiled by a conservative think tank July 16 that would pay down the unfunded liabilities, create a DC plan for future state employees and introduce more transparency. The response from the deputy director of the state’s Legislative Commission on Pensions and Retirement: Underfunding “is really getting to be a non-issue … let the markets do what they’re going to do to help fund these pension plans.” Ruh-roh, as the great American philosopher Scooby Doo once said.
John Ortman is NTSA's Communications Director.
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