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Topic: Pension related insolvency threatens Burton-who next?

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untanglingwebs
El Supremo

The failures of the state to properly manage the MERS (Municipal Employees Retirement System) is having an impact on the communities that moved their pension programs to MERS. It is estimated that 8 of 10 Michigan communities hold their pension liabilities with MERS.

The March 2 edition of the Burton View had a front page story by Tanya Terry that detailed the impact of the City of Burton's problem with unfunded liabilities in the pension fund that impacted their recent dispute over the AFSCME contract ratification that will be in effect until 2020.

Burton Mayor Paula Zelenko opposed city council approval of the collective bargaining agreement because of the draconian cuts to employee benefits, especially their pensions. The council approved the cuts in a 6-1 vote.


Last edited by untanglingwebs on Sat Mar 11, 2017 11:08 am; edited 1 time in total
Post Sat Mar 11, 2017 7:19 am 
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untanglingwebs
El Supremo

According to Terry, Zelenko is concerned over how to obtain and retain quality employees. Zelenko told Terry "It provides no flexibility to hire employees at higher wage based on their skill and experience. That becomes problematic for me in finding employees."

According to Zelenko some employees have already left their positions in the city because of compensation related issues. Zelenko stated she feared the cuts would hamper the ability of the city to hire the most qualified staff and she fears city services will suffer.

The 15-14 approval of the contract by the union bargaining unit may illustrate the deep division among the city workforce. Zelenko discussed how overall morale of the employees declined after the contract and allowed the creation of stress between the supervisors and their workforce.
Post Sat Mar 11, 2017 7:39 am 
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untanglingwebs
El Supremo

While Zelenko did not agree with the contract, council was also dealing with a rising liability caused by increasing legacy issues that threatens the city with possible insolvency in to 5 years.

Councilman Vaughn Smith discussed the impact the changing economic environment has had on those who have retired and now have encountered financial instability.

The MERS pension program did not meet expectations anticipated by the actuaries, explained Smith. Because of these deficits, Smith detailed how the City of Burton has hired a labor attorney and is working with the employees to create pensions at at level the city can afford.
Post Sat Mar 11, 2017 7:59 am 
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untanglingwebs
El Supremo

http://www.flinttalk.com/viewtopic.php?t=12384

This link describes how MERS has not met anticipated growth and Michigan Capital Confidential describes the impact. Rep. Pam Faris has been very vocal on the issue and the impact on the nearly 80% of Michigan communities that are investing in MERS. Lansing State Journal has also printed a great deal on the problem.
Post Sat Mar 11, 2017 8:07 am 
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untanglingwebs
El Supremo

While Vaughn acknowledged he was aware that employees were unhappy with the decision of council, he is concerned on the long term impact of being unable to meet pension promises in the future.

Like Flint, the City of Burton borrowed money from the pension fund in order to maintain other city services.
Post Sat Mar 11, 2017 10:37 am 
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untanglingwebs
El Supremo

Burton has very little funding for their pensions. According to the story by Terry, the pension fund is only financed at 37%, down from 39% last year. In 2016 Mers was asking for a $2,4 million payment and the city paid $3.4 million , only to have their unfunded pension liability grow. The city was said to have lost $4 million because of the poor investments in the stock markets.

City officials state the pension fund is structured that the investments must have a eight and a quarter return and last year they lost money. It was estimated the City required a 17 percent return this year.

Each year the city pays out $3.1 million to their retirees. Councilman Vaughn Smith worries that at some point, there will not be enough money to pay the pensions promised. Burton owes $28,million in pensions alone, said Smith.
Post Sat Mar 11, 2017 11:00 am 
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untanglingwebs
El Supremo

Smith also commented on the rise in the level of poverty in Burton. Four to five years ago the poverty rate was 13%, said Vaughn, who noted the rate is now about 20%. Vaughn believed the council could not ak for more money after asking for a police millage.
Post Sat Mar 11, 2017 11:04 am 
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untanglingwebs
El Supremo

http://flinttalk.com/viewtopic.php?t=12384 Flint pension related woes


http://flinttalk.com/viewtopic.php?t=12398
GOP moves on Michigan pensions.
Post Sat Mar 11, 2017 11:13 am 
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