Greg MacMaster SenateOn Jan. 22, Gov. Rick Snyder proposed spending $350 million in tobacco settlement money to shore up the Detroit’s two city employee pension funds.
These pension funds are currently underfunded by $3.5 billion, according to Kevyn Orr, the city’s emergency manager.
The Legislature is currently informally discussing the governor’s proposal, and although a vote has not been scheduled there is an expectation that it will occur before the summer break.
Based on what I know today about the governor’s $350 million bailout proposal, I will vote against it for the following reasons.
■ It’s not fair to local taxpayers.
It’s not fair to force northern Michigan taxpayers to — again — pay for Lansing projects that don’t benefit our communities or our region. On a whole variety of issues, our tax dollars flow to Lansing only to be spent in southeast or west Michigan.
Our local governments receive less in state revenue sharing, our local infrastructure is underfunded, and our per-pupil school funding is less than in other parts of the state.
The time has come for the legislature to stop using northern Michigan as its piggy bank.
■ It’s not fair to local governments.
Fitch Ratings, an independent Wall Street credit rating agency, has indicated that the governor’s priority of bailing out Detroit’s pension funds could make it more difficult and more expensive for other Michigan municipalities to issue bonds and borrow money.
Northern Michigan’s local governments are run well. And to think this bailout could result in them incurring higher borrowing costs because of another city’s mismanagement, and subsequent state bailout, is unacceptable.
■ It creates a troubling precedent.
No Michigan municipality — even those under state receivership — has received a bailout similar to that which is being proposed for Detroit.
The unfunded liabilities of just the third of all the municipalities that belong to the Michigan Municipal Employees Retirement System consortium are nearly $3 billion.
While I have great sympathy for Detroit’s public employee retirees, whose retirements are being jeopardized by that city’s fiscal mismanagement, the fact remains: if Detroit is bailed out, how can any of these other municipalities be denied a bailout?
The governor’s plan creates an implicit contract that Michigan taxpayers will be the funders of last resort for any mismanaged public pension fund. And these amounts could run into the billions.
■ Detroit already receives special treatment from Lansing.
Historically, Detroit has received generous support from state government.
The state has decreed that Detroit is the only city in Michigan that can assess its own utility tax. It’s the only city that can assess a wagering tax. It has the highest city tax in the state. The state has helped Detroit borrow $610 million between 2005 and 2011 alone. The list of special treatment goes on and on. But perhaps the most egregious example of how Detroit is treated better than other municipalities is in state revenue sharing payments.
In 2013 state budget included $236 million in optional revenue sharing payments to cities, villages and townships. That’s funding that helps to pay for local fire, police and a host of other local government services.
Detroit alone took 58 percent of these payments. Michigan’s other 1,240 townships, 275 cities, and 257 villages split up the rest.
Far from the claim that the state has been neglecting Detroit, the state has been propping up Detroit for years. And what have Michigan taxpayers received for their generosity? Epic corruption and fiscal mismanagement.
I want Detroit to be successful. And I believe the city has turned a corner.
But northern Michigan has needs too. Our taxpayers can no longer be the state’s piggy bank. And until the state returns its $971 million surplus to taxpayers, reduces the size of government and distributes state funding more fairly, I cannot support this $350 million bailout of Detroit.
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State Rep. Greg MacMaster, R-Kewadin, currently represents the 105th District and is running for the 37th State Senate seat.