Posted by 12 May 2016
The state of Michigan has accumulated huge unfunded liabilities in the government employee retirement systems it runs due to failing to deposit the required amounts into pension funds. The system for public school employees is the largest and currently has a $26.5 billion unfunded liability. Taxpayers are on the hook for this debt to the tune of more than $2,600 for every man, woman, and child in the state.
So it is significant that for the sixth year in a row state officials once again failed to adequately fund the system. According to an article in Michigan Capitol Confidential, the state’s own actuaries calculated that it should deposit $2.18 billion into the school employee system this year. The deposit covers the additional pension benefits accrued by individual employees for the year, plus some extra to cover catching up on past underfunding.http://www.michigancapitolconfidential.com/22411
However, the state only contributed $1.97 billion, shorting its “Annual Required Contribution” by $210 million.
Legislation has been introduced to contain the growing burden by no longer enrolling new school employees into the defined benefit pension system. Under the bills, new hires would instead get defined contribution, 401(k)-type benefits (see House Bill 5218 and Senate Bill 102).