Fire Chief Calls City’s $92 Million Pension Debt ‘Responsible’

Midland’s underfunding has been going up, not down, with only 70 cents on the dollar saved

On Tuesday, Midland Fire Chief Chris Coughlin testified before legislative committees in the state House and Senate against legislation requiring local governments to pre-fund retirement benefits they have promised to their employees. He argued that the proposal intrudes too deeply into the affairs of local governments.

Coughlin said he was speaking on behalf of a coalition of 30,000 Michigan fire and police employees, plus attorneys within the offices of county prosecutors as well as government employee unions.

In his testimony to the Senate Committee on Michigan Competitiveness, Coughlin said the city of Midland is responsible about funding the retirement benefits it has promised to employees.

“The city of Midland, for instance, has done a very responsible job of funding its pension liabilities,” Coughlin said during his comments.

ForTheRecord says: Coughlin appears to have a strained definition of what constitutes a “responsible job of funding its pension liabilities.”

According to the city’s 2016 annual financial report, the city’s police and fire pension fund has only 71 percent of the amount it should have to pay future benefits. The pension fund for other city employees has just 58 percent of the amount that actuaries project is needed, according to the latest report from the entity that administers Midland’s retirement system.

The total amount of Midland's pension underfunding is $92.9 million, and it represents 70 percent of the total long-term debt owed by the city, which is $132.3 million. To place those figures in context, Midland’s total spending was $83.0 million in 2016, of which $19.1 million was for public safety.

In an interview with Michigan Capitol Confidential, Coughlin said he considers the 71 percent funding level for fire and police pensions to be responsible, since Midland has been paying down its pension liability in recent years.

“I say that is a responsible amount and has improved in past years,” Coughlin said.

But based on annual financial reports for the past few years, Midland appears to be losing ground, not gaining it.

According to Midland’s 2015 comprehensive annual financial report, pensions for Midland police and fire employees were 77 percent funded in that year. The 2014 report showed the pension fund held 79 percent of the amount it should have to meet its promises.

And those higher funding levels in recent years are down dramatically from 2003, when the system was funded at 103 percent, and 2004, when the pension fund held slightly less than 100 percent of the amount it should have. The 2008-09 market crash and other factors drove down the value of Midland’s pension fund investments to a low point of just 69 percent funded at the end of 2011.

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.