David Walker – PwC Interview & Presentation
WHY THIS, WHY NOW?
The West Michigan Policy Forum addresses the looming problem of Unfunded Liabilities
The WMPF commissioned PwC to do a deeper study of the actual legacy/pension costs of our schools and local governments in order to better understand the problem and explore some next steps that could address these liabilities that have been vastly understated. Recognizing that doing nothing will result in hardship and broken promises for hard-working teachers and government employees the WMPF is encouraging our legislators to address this critical issue.
What’s the problem with government pensions and retiree healthcare?
- The problems from underfunding are far worse than we’ve been told.
- Bad assumptions and unrealistic promises are:
- Strangling the budgets of our schools and local governments
- Piling burdens on the backs of our kids and grandkids in debt
- Risking the future benefits of hardworking teachers, police officers and maintenance workers
- The problem comes from both underfunded pension and unfunded retiree healthcare promises. The bulk of the problem, though, is in unfunded retiree healthcare. The promises were made but these benefits have not been funded; therefore, employees are at risk of not receiving the benefit.
- Some cities would need to spend 100% of their operating budget every year for 20 years to retire this combined debt – without spending one dollar on a police officer, fire fighter or public works employee. Obviously not possible. Massive tax increases and drastic cuts to services are coming or promises of benefits will be broken, UNLESS changes are made now.
Does the WMPF advocate taking away the pensions teachers, firefighters, police officers and other government employees have earned?
No, we don’t. Just the opposite.
We believe if unaddressed the promises made to these hard working employees will be broken because they aren’t funded. So, we’re calling for action now to keep the retirement promises of current retirees and employees currently earning retirement benefits.
Why should we act fast? Shouldn’t we take our time?
These alarming problems only get worse with time. Solutions are needed sooner rather than later to protect workers, taxpayers and the future of our kids.
What do we need to do?
- Protect the pensions people have earned (see Detroit where a failure to act meant that retirees lost part of their pension). Anyone who currently receives a pension and anyone who is currently earning a pension should keep it. The promise of retiree healthcare should be kept, but delivered via today’s changed healthcare market.
- Empower future employees by transferring control from politicians to the people who serve our communities.
- Attract new talent and younger workers who want the power to make career changes that are enabled by 401(k)-style plans. Defined Benefit plans limit employees’ ability to move to new jobs whereas Defined Contribution plans allow employees to develop their careers as they see fit.
- Align public sector benefits to more closely match those of taxpayers, who work in in all sectors, and who ultimately pay the bills for retirement and healthcare benefits for government retirees and workers.