The days of reckoning and reconciling with fiscal reality have been coming at us in Michigan for several years now. Essentially, the story begins with the Big Three: automotive titans General Motors, Ford and Chrysler and their union counterparts. In their heyday, they ruled the world in automotive production. Their seemingly invincible auto sales profits led them to set standards in health care and retirement benefit standards in 1900s America.
But with the new millennium, it became obvious the world had indeed changed, and that other nations, yearning for America’s lifestyles, were ready to challenge and compete for manufacturing jobs. The result is all too well known.
In that heyday, however, when business, industry and education were all competing for employees that fit their needs, rate of pay was substantial and entitlement benefits became, well, big entitlement benefits. It spread all across America’s economy. Healthcare had historically been a manageable aspect of American life. But with big business, big industry and big government paying the price as an insurance benefit, Americans lost track of the actual cost. It was OK with the insurance companies; they just kept raising the rates.
At the time, it was an unbridled feast for all concerned. But the piper must be paid. After the near-failure and radical restructuring of the car companies, Michigan cities and school districts remain on the verge of bankruptcy. Healthcare costs, and how they are determined and billed, are a total mystery to most of us. Unfunded (meaning there’s no money set aside) pension liabilities are $45 billion and climbing. And that’s only for public education. We don’t have money for other social services, let alone badly needed infrastructure projects in water, sewer and roads. And we have those billions of unfunded entitlement payments that must be made. That’s the bad news.
Are you ready for some good news? Budget-busting defined benefit plans in the public sector are rapidly giving way to defined contribution benefits. Obviously, for a state agency, city or school system trying to control their costs, it is a welcome change.
Michigan’s Legislature has received the message. Unlike the governors and politicians of recent years, they apparently are refusing to kick the can down the road. They have already made changes to make state employee benefit plans more sustainable, and they are on the verge of doing the same for public education with Senate Bill 1040.
Unfortunately, this legislation changes the rules for people who were promised a certain path to retirement and whose path will be disrupted. There should be a fair timeline for educators near retirement revised in a way that does not devastate their career-long planning. No less important are considerations for people at the lower ends of seniority; SB 1040 also places a burden on some of the people least able to afford it. Impending legislation, however necessary, must include respect for promises made.
But it’s time to move on …
Our elected leaders have acknowledged the inability to sustain the rising fiscal burden of benefits conferred. We believe this legislation, when properly filtered for fundamental fairness, is essential to Michigan’s financial viability.
In the end, without structural reforms, none of us will have what we want.
Editorial opinions are the consensus of The Daily News editorial board.