Retirement benefits lack funding compared to pensions in Southeastern Michigan

For majority of the states and local government entities across the country one of the most attractive pieces of their compensation packages has been the offering of retiree health care, dental and vision insurance after retirement and life insurance. These benefits are referred to as Other Post Employment Benefits (OPEB) and are not part of an employee’s pension fund. According to the International City/County Management Association (ICMA) OPEB packages have traditionally been generous (ie. Offering full medical insurance coverage after retirement) as a way to attract talent, since public sector salaries are typically lower than those in the private sector. While public employers (ie. state and local government agencies) have traditionally funded their pension obligations during the time in which employees are working, majority of OPEB funding isn’t paid for until after employees retire in a pay-as-you-go manner, according to Michigan State University-Extension. In 2007, the Governmental Accounting Standards Board required all U.S. municipalities to measure the OPEB percent funded and unfunded in their community, which had not been required before. Prior to this change, according to ICMA, most government entities had only incrementally calculated what was owed on an annual basis in context to their annual budget. This new accounting standard though forces government entities to examine what their OPEB costs will be over the long-term and how it will affect their budget, especially as the cost of medical care continues to rise. According to research conducted by Michigan State University-Extension, the burden to fund OPEBs has proven to be a financial stressor for many communities in Michigan, and beyond.

The maps below showcase survey data from the public-sector-financial-based website Munetrix.com; not all communities in Southeastern Michigan represented and only the data discussed below if representative of the communities’ whose information was made available on the website. According to available data, 99.7 percent had 80 percent or less of their OPEB liabilities funded in 2012 while 62 percent of communities with available 2012 pension funding data had 80 percent or less of their defined pensions funded. While there is no single number for whether an OPEB, or pension fund, is healthy or unhealthy there are frequent references in the accounting world that if such a fund is funded at 80 percent or higher it is considered healthy, according to a 2007 Government Accountability Office report. The lack of funding of OPEB obligations above 80 percent compared to pension funding above 80 percent is not unique to Southeastern Michigan, or the communities throughout the state, at all. Rather this is a growing problem communities across the country are trying deal with, according to Michigan State University-Extension.

As noted above, and as can be seen in the maps, more data was provided on pension funding than OPEB funding by Munetrix. Just as data lacks on OPEB funding so does the percent of such funded liabilities. In the region in 2012, according to the data presented, the city of Holly had the highest percent of OPEB funding at 121 percent; Macomb Township came in second to with62.9 percent. Several of the communities with information available had 0 percent of their OPEB liabilities funded. These communities were:

  •   Flat Rock
  •   Grosse Ile
  •   Grosse Pointe Woods
  •   Hamtramck
  •   Harper Woods
  •   Lincoln Park
  •   Clawson
  •   Memphis
  •   Fraser

For 2012, OPEB funding information was not available on the city of Detroit through Munetrix. However, through court documents related to the City of Detroit’s bankruptcy filing , in 2011 Detroit’s OPEB liability was 99.6 percent unfunded; the total OPEB liability at that time was $5.7 billion. Before bankruptcy proceedings were complete, the city had 22 different OPEB related plans, 15 of which were directly related to medical and prescription drug care. Since Detroit came out of bankruptcy its retiree healthcare benefits are funded through two Voluntary Employment Benefits Association trusts. In total, it is estimated these funds will have $450 million put into them to fund the city’s OPEB, according to the Detroit News.

Also when viewing the pension map we see that information for the city of Detroit was not provided for this as well. The city has two pension systems, the general employee pension system and the police and fire system. According to the bankruptcy documents, by the end of 2011 the city owed $1.7 billion to the general employee system and $1.6 billion to the police and fire system.

As Detroit exited bankruptcy in 2014, according to the New York Times, the general employee pension system was 74 percent funded and the fire and police system was 78 percent funded. From now through 2024 the city will not contribute to the pension fund from general fund dollars. Instead, revenues from the Detroit Water and Sewerage Department, settlement monies from general-obligation bondholders and donations from foundations and the state (as part of the “grand bargain“) will fund the pension system, according to the Detroit News.

When looking back at the communities that did have pension data available for 2012 we see that 38 of the 98 had their pension systems funded at 80 percent of above. Of those, the communities below had their pension systems funded above 100 percent:

  • Dearborn
  • Rockwood
  • Lima Township
  • Northfield Township
  • Marine City
  • Ferndale
  • Groveland Township
  • Royal Oak Charter Township
  • Erie Township
  • Brighton Township

Of the communities that had their pension liabilities funded below 80 percent in 2012, Lincoln Park had the lowest at 34.6 percent.

NYT: Transportation a key factor in escaping poverty

A recent article from The New York Times highlights a Harvard study that finds access to transportation is a strong factor in escaping poverty. According to the article, the link between transportation and social mobility is stronger than the relationship between social mobility and crime, education, or family makeup. To read more about this study click here for The New York Times article.

NYT: Middle-class occupations have shifted

The following graphics, from the New York Times, summarize the labor market changes nationally since 1980. They make very clear why Michigan and the Detroit Metropolitan area have had such a hard time, given this area’s concentration in two categories–skilled production workers and machine operators and assemblers. Both of these categories have declined precipitously, both in absolute and relative terms. The accompanying article is a useful explanation of the national trends.

http://www.nytimes.com/interactive/2015/02/23/business/economy/the-changing-nature-of-middle-class-jobs.html

More affluent school districts in Southeastern Michigan have higher immunization waiver rates

In recent weeks news has broken about outbreaks of diseases many have thought were eradicated. From a mumps outbreak in the NHL to a measles outbreak at Disney World, in which the pattern includes seven different states with a whooping cough outbreaks, and a measles outbreak much closer to home in Grand Traverse and Leelanau counties- we are seeing that these diseases are indeed making a comeback, and many believe it is because of the growing number of children not being immunized.

While there have been no such outbreaks as mentioned above, immunization rates do vary in Southeastern Michigan, with some school districts having rates lower than the minimum thresholds needed to prevent the spread of disease. This is problematic, as low immunization rates threaten herd immunity and puts both vaccinated and non-vaccinated individuals at risk.

What is herd immunity?

The phrase “herd immunity” refers to protecting a community from disease by having a critical mass of its population immunized. Rather than just protecting the person vaccinated, vaccines can protect the entire community by breaking the chain of an infection’s transmission. However, for this to be successful, a certain number of people have to be vaccinated.

Epidemiologists have determined a basic threshold for infectious disease transmission by calculating both a “basic reproduction number” (R0), which represents how many people in an unprotected population one infected person can pass the disease along to – basically, a single person with mumps can pass it along to between 4 and 7 non-vaccinated people, while a single person with the measles could pass it along to between 12 and 18. The higher this R0 value is, the higher the percentage of vaccinated people in the population has to be, in order to prevent the spread of these illnesses. Therefore, in order to prevent an outbreak of measles, for instance, in a school district, 89-94% of students would have to be immunized.

diease

Photo credit © Tangled Bank Studios; data from Epidemiologic Reviews, 1993.

Furthermore, it is important for the population to be immunized in order to protect the health of those who cannot be vaccinated, such as infants and people with weakened immune systems. When large chunks of the community are not protected against these diseases, it is these groups of people whose health with be the most affected.

What are the immunization rates in Southeast Michigan schools?

Rates vary from well above minimum threshold numbers for even the most contagious diseases (Hazel Park and Southfield schools both have rates of 98%) to far below the threshold for any sort of protection (Madison Public Schools has the lowest, at only 70% vaccinated). However, it is important to note that not all school districts track vaccination rates uniformly – Inkster Public Schools, for instance, is reporting a 100% vaccination rate, but that’s based on an interview with a very small sample of students and may not be accurate.

Note: Data unavailable for Willow Run Schools (white area), as it was absorbed into Ypsilanti Schools this year.

One interesting trend present in the map is how more affluent districts seem to have lower vaccination rates than their less affluent counterparts, suggesting that non-vaccination is more of a trend in middle- to upper-income communities (although this certainly does not hold true for all). One important fact about herd immunity is that being vaccinated yourself (or vaccinating your children) matters less when the population isn’t immunized. For example, an unvaccinated student in Hazel Park would have less of a chance of catching a vaccine-preventable illness than a vaccinated student in neighboring Madison Heights, since it would be exceedingly difficult for disease to spread in a population that is nearly universally protected against it.

What is Michigan doing to boost vaccination rates?

As of January 1, 2015, the Michigan Department of Community Health changed their rules on obtaining an exemption waiver for vaccinations. Starting this year, parents will still have the right to refuse inoculations, but first they have to be educated by a local health worker about vaccines and the diseases they are intended to prevent, and sign a universal state form that includes a statement of acknowledgement that they understand they may be putting their own children and others at risk by refusing shots.

Currently, Michigan is one of 20 states that allow such an exemption. With this being the case, it was still easier to obtain a waiver here than it is elsewhere – for instance, Arkansas and Minnesota require a waiver form to be notarized, and Vermont requires parents who opt out to renew their waiver each year, instead of just for kindergarten, sixth grade, and in the event of a school transfer.

There is a definite correlation between the ease of getting an exemption waiver for vaccinations and the percentage of students who obtain waivers, as one study (Blank, Caplan & Constable, 2013) found that states with an easier process had waiver rates twice as high as those with more complicated ones. Therefore, by tightening these restrictions, Michigan’s vaccination waiver rates may decrease, and vaccination rates may increase.

Sources

http://www.pbs.org/wgbh/nova/body/herd-immunity.html
http://www.mlive.com/news/index.ssf/2014/12/vaccination_rule_change_propos.html
Blank, N.R., Caplan, A.R. & Constable, C. (2013) Excempting schoolchildren from immunizations: States with few barriers had highest rates of nonmedical exemptions. Health Affairs 32(7): 1282-1290. http://content.healthaffairs.org/content/32/7/1282.abstract

 

Detroit News: Detroit home program not as successful as originally thought

According to a recent Detroit News article, Detroit Mayor Mike Duggan’s home auction program launched in 2014 looked successful on the outside. Of the about 400 abandoned homes up for auction, 394 were bid on and appeared to be being transferred to new owners. However, of those 394 supposed-to-be-new homeowners only about a third were able to close on the homes. Additionally, 37 of the closings were delayed and dozens fell through. In total, according to numbers provided by the Detroit Land Bank, 138 properties were closed on. To read more click here.

NYT: Lower wage earners hit the hardest by local, state taxes

An article recently released by the New York Times shed light on a study produced by the Institute of Taxation and Economic Policy that shows how lower wage earners pay a large percentage of their income in local and state taxes than the middle fifth and 1 percent of Americans.

In Michigan, according to the study, the share of a family income of non-elderly taxpayers paid in state and local taxes was 5.1 percent. The lowest 20 percent paid 9.2 percent of their family income in state and local taxes, the second lowest 20 percent paid 9.4 and the middle lowest paid 9.2 percent. To learn more about who pays what in state and local taxes in Michigan click here. For the whole report click here.

NYT: Non-working men spend more time watching television while women spend more time caring for others

A recent article by the New York Times displays how unemployed men and women typically spend their day. This data, which was part of the American Time Use Survey, shows how non-working men between the ages of 25 and 54 spend more time watching television while women in the same age range without jobs spend more time caring for others. To read more please click here.

Regional leaders committed to growing Michigan’s blue economy

Michigan’s “blue economy” remains a priority for universities, non-profits, government entities and business leaders across the region. Recently, a “Blue Economy Tour” was led by the University Research Corridor (URC) – an alliance of Michigan’s three leading research institutions, Michigan State University, the University of Michigan and Wayne State University that highlighted a mantra many of those in the Great Lakes State have been already know: “Maintain and protect our water resources and Michigan will flourish.”

To read more about Michigan’s growing “blue” industry click here.

MLIVE: Michigan residents poised for SNAP funding cuts

According to MLive, some Michigan residents who receive Supplemental Nutrition Assistance Program benefits are likely to lose an average of $76 a month in funding because of federal cuts that the State of Michigan didn’t take action to avoid. Under the new farm bill, there is a provision that states in order for a person to be eligible for additional SNAP benefits they must receive at least $21 in heating assistance. A Michigan Department of Human Services spokesperson told MLive that the State can’t “justify spending $21 per household for people that didn’t have any energy expenses.” Many people who rent don’t have utility bills and in the past the State only had to pay $1 in heating assistance for a family to be eligible for more SNAP benefits. To learn more click here.

NYT: Minnesota easily reins in carbon emissions

According to the New York Times,  Minnesota continues to mandate strict energy regulations, a fete that residents easily comply with. The article showcases how the state uses more wind energy than all but four states in the country and has reduced its carbon emissions by about 33 percent since 2003. To read more click here.