House GOP Would Stick Taxpayers With Billions

Some Republicans in the Michigan House, among them Appropriations Committee Chairman Rep. Chuck Moss, R-Birmingham, are urging their colleagues to pass legislation that would “prefund” optional health insurance benefits currently provided to retired school employees, who can start collecting these as early as age 46 in some cases.

Unlike regular pension checks, these retiree insurance benefits are completely optional — they could be cut or eliminated tomorrow with a simple majority vote of the House and Senate, plus the governor’s signature. School retirees would still be eligible for federal Medicare benefits at age 65, just like the rest of us.

These optional benefits cost taxpayers $795 million last year. Reportedly, prefunding them would add hundreds of millions more each year that otherwise could be used to fix roads, hire more police, or maybe even provide a tax cut to citizens.

Most people are surprised to learn these retiree health benefits are optional because state officials generally make no distinction between them and regular pensions. Under the state Constitution, however, a retiree’s monthly pension checks are considered “accrued benefits” and guaranteed. In contrast, school retiree health insurance is just one more spending line item in the annual budget.

Related, given that the state Constitution neither requires these benefits nor protects any money set aside to pay for them, future legislatures will be under no obligation not to “raid” the enormous pot of money that prefunding would create. Current lawmakers may swear on stacks of constitutions that this will never happen, but their oaths would not be binding on their successors — or even on themselves. The outcome is likely to be a massive “slush fund” for new spending. (This is more than conjecture — it’s already happened in recent history.)

Persistent underfunding of the mandated pension benefits by politicians and officials has created almost $18 billion in unfunded liabilities. That’s some $4,600 per Michigan household which must be paid eventually. Why then do lawmakers want to take even more taxpayer dollars to give school retirees an extra, optional benefit that hardly any of their neighbors get?

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.