Momentum on the Board of Commissioners is building to put new taxes on the ballot. Rahbi Yousef argued strongly in favor of such a measure at the July 24, 2013 meeting of the Board. He had support from Commissioner Conan Smith.
The Secret Deal with the Public Employees’ Unions that will have your Grandchildren Paying for their Retirement
All new employees of Washtenaw County, after January 1, 2014 will be enrolled in a defined contribution retirement plan (similar to a 401k). This avoids the problem of unfunded liabilities because the County owes the employee only what the employee and the County contributed to their retirement account during their years of employment. No longer are they obligated to pay the employee a pension for life.
What the Board of Commissioners does not want to advertise is that the same thing happened 30 years ago, only to be undone by the Commission in 2008.
Conan Smith alludes to this deal at a Board meeting in June, 2013 but he doesn’t take any responsibility for the decision to make the secret deal, even though he was a member of the Board in 2008.
All new employees of Washtenaw County, after January 1, 1984, were enrolled in a defined contribution retirement plan that was called the Money Purchase Pension Plan (MPPP). By 2007, more than 80% of the active employees were in the MPPP and no longer in the pension plans (WCERS). The pension plan was about to enter the final phase, where all of the members of the plan would be retired and it would be phased out as the members died. There would have been little if any unfunded liabilities.
The Board at that time had 11 Commissioners;
Karen Lovejoy Roe
Rolland Sizemore, Jr.*
Barbara Levin Bergman
* These three members are still on the Board
All of the deliberations about the decision to allow employees in the MPPP buy back into the pension plan occurred in executive session because they were part of collective bargaining, which is allowed under the Open Meetings Act. The final contracts had to be ratified by the Board in open session but there was no discussion during those votes of the decision to re-open the County pension plan.
That decision increased the length of time that the County taxpayers will be paying for pensions by three decades. It also greatly increased the total amount the taxpayers will owe to County employees.
Since many of the County employees who were promoting this decision to the Board and who were the source of information about the decision were enrolled in the MPPP, they had a conflict of interest since they would benefit from the decision to allow them to buy back into the pension plan and receive all of their years of service toward their pension.
Although, the Open Meetings Act allows the Board to meet in executive session and claim exemption for the minutes of those meetings, the Board does not have to claim that exemption. The Board should instruct the County Administrator to release the minutes of those meetings.
The state legislature passed a law to encourage governments to convert from defined benefit pension plans to defined contribution (401k) retirement accounts. That law allows the County to borrow money to fund the existing pension plan (WCERS, Washtenaw County Employee Retirement System) after the County closes enrollment for new employees. Once the pension plan is closed to new employees, those employees no longer contribute money from their wages to the pension plan but the employees who are already retired continue to receive money from the plan. Eventually, as the retirees die, the money paid from the plan dwindles to nothing. This means that the County must increase the amount of money it puts into the pension fund in the early years and in later years it will contribute less than it does now.
In addition the cost of providing retiree health benefits is increasing. This is leaving the healthcare trust underfunded (VEBA)
The problem: The County must budget an additional $5 million contribution to the pension plan and health benefits plan in the next 4 years and for several years thereafter until some of the retirees die and reduce the amount the County must contribute.
The County has a $200 million budget but about 60% of the budget is spent on mandatory programs that cannot be cut. The County administrator estimates that she would need to cut about 70 people from the budget in order to cut $5 million. It may be argued that not all of the cuts need to be from personnel but this is the figure that the administrator has given the County Commissioners.
The proposed solution: The County Commissioners are set to approve, at their July 10, 2013 meeting, the issuing of $345 million in unsecured bonds, which will cost an additional $239 million in interest over the next 25 years. Most of the money will be invested in the stock market with the hope that it will make enough income to pay at least the interest on the debt.
The new State law allows the Commissioners to issue this huge new debt without a vote of the citizens of Washtenaw County. The County Commissioners are rushing through the approval because they want to be able to issue the new debt before December 31, 2013 so that they can use it to fund the 2014 budget and to take advantage of current low interest rates.
The voters can have a say only if we can gather 15,000 signatures from registered voters in Washtenaw County to put the question on the February 2014 ballot.
The proposed resolution
What will the interest rate be on the bonds?
What is the County’s history of returns on their investments?
Are there alternatives to borrowing $345 million?
A Video Timeline of the Discussions of the Retirement Bonding
Issue by the Washtenaw County Board of Commissioners
“The Washtenaw Watch Dogs booth at the Ann Arbor Art Fair, July 17-20, 2013.
We successfully recruited many new volunteers for the petition drive and made connections to other non-profit organizations who may help with the petition drive. Special thanks goes to Donald Salberg (pictured), Shawn Letwin, John Klink, Joseph Miriani, and Ken Warner who helped staff the booth.