The city council asked legislators to restore subsidies for city pensions. Josh Hypes | Collegian
The Hillsdale City Council joined communities across Michigan in urging state legislators to restore subsidies to city pension funds.
State legislators removed a $250 million incentive from HB 5054, which would have gone to cities that could fund 60% of their pension plans, according to an April 3 council resolution. Meanwhile, the state will continue offering a total of $750 million to communities that cannot meet the threshold. The council unanimously passed a resolution on April 3 to condemn the move.
Pensions invest a portion of employee wages into a fund, where it can grow in value while retired workers withdraw from the fund.
Ward 3 Councilman Gary Wolfram said the state was discriminating against communities that remained financially responsible.
“The state is giving money to those cities that did not take actions to try to improve their pension liability situation,” Wolfram said, “while the cities that did meet that 60% standard no longer get anything.”
The city pension fund now faces similar instability to those that failed to reach the threshold, according to a letter City Manager David Mackie sent to Republican state Rep. Andrew Fink.
“The $250 million included in HB 5054 for communities that sacrificed to solidify their pensions would provide immeasurable relief to those of us who are experiencing the same pension-related financial stress as those eligible for the much larger sum,” Mackie said in the letter.
Wolfram said one of the ways cities can remain financially responsible is by changing from a defined-benefit model, where the employer guarantees a retirement income, to a defined-contribution model, where the employer contributes to an employee account over time.
The city will face difficult decisions if it does not receive funding from the state, according to Mackie’s letter.
“Without these dollars, many of us are staring at significant debt retirement payments on top of greatly increased required pension contributions,” Mackie wrote. “Others are staring at more cuts to the programs and projects our taxpayers depend upon. In short, we are looking at more pain.”
Mackie called on legislators to restore the pension incentive.
“HB 5054 had broad bipartisan support in 2022, and we are hopeful such bipartisan support remains,” Mackie said. “Bringing this funding back would be a game changer for us as we look to keep our pension liabilities under control, our finances stable, and the great places we represent the very best versions of themselves for the many who call them home.”
The Collegian reached out to Fink for comment, but did not hear back in time for publication.
