LANSING – A decade ago, most of Michigan’s public retirement systems were in splendid shape, but 10 years of economic battering, especially by the stock market, has left the state with an unfunded liability of $15.4 billion, a report by the Senate Fiscal Agency said.

The report also said measures undertaken in 2010 to have public school workers and state employees contribute toward their retirement health care costs represent an “initial effort” to help prefund those benefits instead of keeping them wholly on a “pay as you go system.”

Governor Rick Snyder on Monday also unveiled his plain language balance sheet, which also outlined the financial depth of the problems the state faces.

The SFA report, however, points out how dramatically the fiscal condition of the state pension systems has changed in the last decade as the state has struggled economically.

The report also points out the retirement system may “not be immune from further adjustments” as the state tries to sort out its anticipated budget deficit.

The problem of unfunded liabilities at state and local levels is common now throughout the land, and the SFA said state officials may “benefit from a close observation of nationwide efforts to stabilize public sector retirement systems.”

The state has five pension systems under its management: for public school employees, state employees, the State Police, the state’s judges and the Legislature.

In the 1999-2000 fiscal year, every pension system except the school employees was fully funded against future obligations. Even then, the school employees system was funded at 99.3 percent of its future obligations.

But as the economy weakened, and each system saw more retirees than it did contributors to the system, that situation changed.

In the 2008-09 fiscal year, just the judges retirement system was fully funded against its future obligations.

The school workers system had an unfunded liability of $11.99 billion, state employees had an unfunded liability of $3.1 billion, State Police had a $295.9 million liability and the legislative system had an unfunded balance of $5.6 million.

In the case of the state workers system, there are now nearly twice as many workers drawing retirement benefits as there are employees contributing. In 2000-01, there were 8,000 more workers contributing to the system than were drawing against it.

In terms of school workers, there were about 55,000 more employees contributing to the system than drawing against it. But in 2000-01, there were 2.5 times as many people contributing to the system than drawing against it.

Also hurting the systems has been the fate of the financial markets. With lackluster stock market earnings in several years during the last decade, the retirement systems did not see the earnings they had expected.

All the retirement systems have unfunded liabilities in terms of retiree health care. The school workers system now has unfunded benefits of $27.6 billion, state workers $12.6 billion, the State Police $882.3 million, the judges $6.6 million and the legislative system has an unfunded liability of $122.3 million.

The health care system is in the worst shape overall because most retirement systems do not contribute to upcoming liabilities as they do for retirement. Those have been paid for on a pay as you go system.

The changes made in 2010 to both the school workers and state employees systems (all state workers and school workers now have to pay 3 percent of their salaries toward future health care obligations) represented the first effort on the part of the state to prefund those benefits in a significant way.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

a>>