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Flint, MI– Flint city officials say rising pension costs which are draining the city’s general fund, and they’re looking to the state for help.
During the community budget hearing on March 30, Mayor Sheldon Neeley and Chief Financial Officer Robert Widigan said this has been a problem for decades, and one that emergency managers failed to deal with.
“Failure to pay these legacy costs allowed past administrations and emergency managers to claim fantasy fund balances,” Widigan said. “Legacy costs are not a new problem. They’ve been an increasing concern for decades.”
Flint’s pension fund obligations, which were $21 million in 2018, are projected to be $32 million in 2023 and $40 million by 2024. Widigan said the city only has one active employee for every six retirees.
“This is an attempt to get the city caught up on underfunded pensions,” Widigan said. “From 2020 to 2024, our annual pension payment has increased over $16 million. To be clear, we do have a moral obligation and a constitutional mandate to fulfill our promise to retirees.”
But Widigan said the city’s pension system is only 27% funded, leaving officials looking to the state for help.
“We’re meeting with stakeholders in Lansing, stakeholders in the community to try to address this issue head on,” he said.
Neeley told the council there are 19 other communities in Michigan dealing with similar issues, and that the city is “asking for legislative relief.”
“Some of those plans are being worked through Lansing now for legislative action to be able to provide some level of help,” Neeley said. “So we’re fully engaged with that.”
Seven years ago, Neeley said, Flint’s former pension system, FERS, was controlled by the city and a nine-member board. The system was about 86% funded with about $450 million in the fund at that time.
He said when emergency managers came, they didn’t have the ability to control the FERS system because it did not qualify for any intervention.
“So the emergency managers could not control that system, but what they did control was the bodies that were on that board,” Neeley said.
He said the emergency managers removed two council members from the board “to effectuate a vote to move the system from FERS to MERS,” the Municipal Employees’ Retirement System.
Neeley said this put the city on “a downward spiral with a weight on our backs.”
Unlike the emergency managers, Widigan said the administration is going to strive to work in cooperation with the city council.
Councilwoman Tonya Burns and Councilwoman Jerri Winfrey-Carter said they were looking forward to more public meetings to discuss the budget in detail with department heads.
Councilwoman Judy Priestley agreed that the city’s legacy costs were a major issue, and said she hoped outside entities could help the city.
“Let’s hope that the governor and the legislature can get together and help solve that for our city, as well as some other municipalities across the state,” she said. “So, I’m looking forward to the hearings, and let’s work together making the city go forward.”
The city’s proposed budget for 2022-2023 and forecasted budget for 2023-2024 can be found here.