Dan Gilmartin: Here are Innovative Ways to Reduce Local Government Retiree Healthcare Costs (OPEB)

There is an excellent column recently posted on Governing.com about the problem of local government retiree healthcare costs in Michigan and beyond. The column prominently features comments and suggestions to addressing the issue by the Michigan Municipal League CEO and Executive Director Dan Gilmartin.

The piece is written by Frank Shaforth, director of the Center for State and Local Government Leadership at George Mason University. Fans and supporters of the League may recognize Frank’s name because he was a keynote speaker at the League’s 2013 Convention in Detroit and he’s been a long-time supporter of the League’s work.

Here are some excerpts of the article, but we’d strongly encourage you to read the full piece here: http://www.governing.com/columns/public-money/gov-localities-retirement-benefits.html.

Michigan’s local governments had put together a meaningful proposal last year to reform other post-employment benefits (OPEB) — the health care and other costs associated with retirement that are in addition to traditional pensions. Under the aegis of the Michigan Municipal League, localities were asking lawmakers to let them make the hard decisions to pare back health-care costs and bring them in line with the private-sector market. “Nobody is talking about ending health care for retirees,” Dan Gilmartin, the league’s executive director and CEO, wrote to members. “But there are innovative ways to reduce costs, and put some of the responsibility for paying a share of those costs onto the individuals who are benefiting — just as happens at most companies.”

State laws, Gilmartin added, do not provide clear authority for communities to rein in costs on their own.

In December, the legislature declined  localities’ request for more leeway. Instead, “the common-sense plans were derailed and stripped down and replaced with a reporting-focused, nonaction-oriented proposal,” according to Gilmartin.

Fixing Michigan’s OPEB problem has been and continues to be one of the many proposals by the Michigan Municipal League that would help address our state’s broken municipal finance system. As indicated in the Governing.com piece, efforts to reform OPEB in Michigan fell drastically short late last year. Frank Shafroth has a suggestion of his own to fixing the OPEB problem in the conclusion of the article. Here it is:

We cannot allow governments to fail because the cost of retiree benefits crowds out essential public services. Rather, perhaps it is time to consider creating or naming a new national commission to consider options — whether they be new federal bankruptcy courts for public pension funds, or the repeal of state statutes that have proved to be obstacles for localities to carry out vital public pension and other retirement benefit reforms. It’s the price of survival.

What do you think? Email us at savemicity@mml.org.