Paying now saves later: Michigan moves to shrink pension burden

The state of Michigan’s debt to its retirees has decreased a bit, according to an actuarial report the State Employees’ Retirement System released earlier this year.

The state had $5.4 billion in unfunded liabilities in 2023, but the debt decreased to $4.8 billion in 2024.

State lawmakers put $738 million into the system, which helped reduce the debt, according to James Hohman, fiscal policy director at the Mackinac Center for Public Policy, who emailed Michigan Capitol Confidential with his comments.

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Hohman added that market gains also helped.

The state increased its ability to fund health insurance and other benefits for retirees, Hohman said.

It now has $6.7 billion saved to pay for $5.7 billion worth of other benefits meant for retirees.

Lawmakers should not leave pension obligations to taxpayers of the future, Hohman wrote in an April 28 blog post. Shoring up the state’s finances now will save taxpayer money in the long run, he said. It will also free up money the state could use for other priorities.

“Deferring costs to future lawmakers is a problem in every state,” Hohman wrote.

When Democrats controlled the Michigan Legislature during the 2023-24 term, Gov. Gretchen Whitmer, also a Democrat, proposed moving $630 million set to pay down pension liabilities in the school retirement system to other projects. Since 2023 Michigan has approved $4.7 billion in corporate handouts.

CapCon reported in June 2024 that redirecting using the funds would cost the taxpayer $1.4 billion.