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Michigan governments struggling to fully fund pension obligations

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(The Center Square) – Several hundred Michigan municipal governments are struggling with vastly underfunded employees pensions.

This is according to a report produced every year by The Municipal Employees’ Retirement System (MERS), an administrator of Michigan pension funds that oversees the numbers found in the annual actuarial valuations report.

The city of Lincoln Park, with a population of 39,000, is one of the hundreds of Michigan municipalities with an underfunded pension plan. Lincoln Park’s pension plan was only 25% funded of its total $43.1 million pension liability as of 2021, according to MERS.

The city mentioned its pension issues in its 2023-24 budget proposal.

“This year, we are anticipating nearly $8M in required payments to the city’s pension systems. While this is consistent with last year, this expenditure still represents approximately thirty percent of the city’s general fund budget,” the budget document stated.

Just 101 of the municipalities covered by MERS had funded their pension systems at 100% or more, according to the 2021 report. That was far higher than the 53 that had 100% funded pension systems in 2020. The median level of funding was 78% in 2021, a 7-percentage point increase from the previous year.

James Hohman, Mackinac Center for Public Policy told The Center Square, “There are few political benefits to maintaining a well-funded pension system, and so few pension systems have been well funded. There always seems to be a more pressing use of funds to elected officials than to bolster pension fund savings.”

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