"As societies grow decadent, the language grows decadent, too. Words are used to disguise, not to illuminate, action: You liberate a city by destroying it. Words are used to confuse, so that at election time people will solemnly vote against their own interests." 
—Gore Vidal, Imperial America, 2004
Two years ago Saginaw residents approved a Public Safety Millage that contained a 6-mil renewal and a 1.5 mil increase that supporters said was necessary for voters to approve if they didn’t want to lose 1/3 of its police & fire fighters. The 1.5 mil increase was approved because voters were told without it the city would need to eliminate 15 police and fire staff.
Now two years later the Saginaw City Council has approved a new $134 million budget that eliminates 21 public safety positions, with 10 positions eliminated in the police department and 11 more from the ranks of firefighters, purportedly saving the city about $1.2 million in wages. In addition, 15 other positions have been cut from the ranks of City Hall to save a total of $2.6 million.
This has led to well-placed outrage on the part of taxpayers legitimately wondering why they have been fleeced, fooled, and now must suffer these losses at a critical juncture in the stabilization of the city. Indeed, the much-touted public safety millage sold to the electorate on the promise of maintaining current levels of police and fire is now purportedly $600,000 short of meeting its goal.
How this can legally be accomplished when the millage funds in question are Dedicated Funds that can only be spent on police & fire is the million-dollar question.
City Manager Darnell Earley euphemistically proclaims that “no layoffs” have occurred and that all the public safety money is indeed being spent upon public safety; but when you don’t replace retirees than obviously, you have reduced levels of service – specifically, the services that supporters of the Public Safety millage promised voters two years ago would not occur.
The key reason this is happening is that elected officials and government bureaucrats have adopted the misguided notion that rather than provide services to the public which they pay for through taxes, apparently their overriding duty is to guarantee general fund pension obligations, which unless you live under a rock, know have gotten way out of hand over the past thirty years.
The City has been running at a perennial $1.8 million shortfall that occurs due to unfunded liabilities and pension plans for decades. And the unfunded liability for the State of Michigan’s four major pensions – schools, state employees, police & judges – is pegged at $11.6 billion, with the future health care liability ranging anywhere from $45-50 billion and possibly higher.
According to The Free Enterprise Nation, which is a national organization representing the economic interests of those within the state who actually work and support the ‘private sector’ portion of our economy, the latest survey by the U.S. Government’s Bureau of Economic Analysis showed that the average federal employee earns $119,982 per year in compensation & benefits, while the average private sector employee earns $59,909. To cover the additional compensation packages of government employees, $100 billion a year is taken from the private sector in income taxes.
Governor Rick Snyder has taken steps to address this with Public Act 4, which allows an Emergency Manager to come into any financially mismanaged city and retroactively deal with these Golden Pension plans that have decimated cities across the State – including Saginaw. Indeed, I’ve known police that have hired into the system at the age of 21 and retired in 20 years by the age of 41 with guarantees of $60,000 and upwards for the remainder of their life. So is it any wonder the city is broke?
Three Solutions to the Mess
But there are ways around this, such as repealing Public Act #78, which gives public safety unions their civil service rights to arbitration. When I was on the Saginaw Charter Commission five years ago, this was one of the methods we proposed back then, which was meant with fierce union opposition and disinformation on the part of public safety unions such as POAM, COAM and IAFF who led the charge against it.
Similarly, last year rescinding Public Act #78 was placed on the ballot and met a similar fate with a 2-1 defeat. But if voters had refrained from buying into the propaganda and actually were to rescind Public Act #78, officers unwilling to compromise in terms of salaries, benefits, pensions, or overtime could either accept what the city offers, or find another job.
“I don’t really see Act 78 as that much of a villain on the cost side,” responds Mayor Greg Branch, “though; the “careerism” is, I think, much more a result of what’s been given in years past in collective bargaining agreements. And all the political courage in the world can’t nullify them. They can only be changed – or eliminated – by the approval of those covered, by bankruptcy or by PA 4.”
Ah yes, Public Act 4. Certainly the unfunded liabilities of the city in terms of future pension plans would invoke that option. And although it carries a stigma, filing Chapter 9 would allow the city to meet obligations as they come due and the city would not have to sell property or give up services. All it would do is readjust those unfunded liabilities to a point where the city would no longer be considered insolvent.
While Saginaw has the legacy costs of well over 1400 people (including City Manager Earley when he qualifies for retirement shortly) that state receivership cannot touch, Federal law trumps state constitutions so those legacy costs could be adjusted downward to more reasonable levels reflecting the realities of today – a primary reality being that many of these pension plans were negotiated back when the average life expectancy was 65 or 70. Now people are living until they are 90 and the simple reality is that nobody – business, citizens, or the state – has the money to pay for them anymore.
Another option that this publication advanced eight years ago apart from filing bankruptcy, bringing in an emergency manager, or rescinding Public Act 78 is to find the amount of money needed to fund these plans, earmark some millage to pay that required amount of money, and then be done with it.
An actuary could estimate how much the city needs to put in each year to pay these plans off; so for example, if one mill a year was earmarked for this over 30 years, it could sustain the system before it goes broke. One of the reasons Saginaw is in such bad shape is because it hasn’t been putting any money into the system, so this would be another solution.
As it now stands, if you have 40,000 people in the city with 20,000 earning a wage supporting 1,400 people on pensions at levels three times higher than the average city worker, approximately five percent of a person’s income goes to the pensions of city employees, perhaps more.
When I recently discussed and put these questions pertaining to public safety reductions and pension issues to Saginaw Mayor Greg Branch, he had this to say:
“It’s not a posture; there’s really nowhere else to go. Unfortunately, whether or not I condone meeting the pension and legacy obligations (some of which might be golden nest eggs, but most of which aren’t) is immaterial. Legally, they must be met. We’ve worked for years to reopen and renegotiate things where we can – particularly retiree healthcare. But we’re bound to provide what was in their contract. The only way out of the contract is bankruptcy or PA 4. We aren’t anywhere near bankruptcy, and I’m not sure PA 4 would be good for any of us – even if we did “qualify.”
“Life expectancy kept climbing, and retirement ages kept dropping. That’s how we got here. And we can all be as pissed off about as we want to be, but we’ve got to pay it. At least now; there’s talk in Lansing about a PA 4 “Lite” that will allow retroactive reopening of labor contracts to reduce retiree benefits.”
“The 7.5 mills for public safety is, has always been and always will be used for salaries and fringes – no pensions – for as many police officers and firefighters as we can squeeze into it. Last year, it was 31 police officers and 20 firefighters. This year, it’s the same number of positions.”
“We will reach a point at which the 7.5 mills does not cover the cost of those 51 positions; we were very clear about that during the millage election campaign. (Technically, it doesn’t now; hence the subsidy). But none of that money has been used for anything other than salaries, FICA, health insurance for those active 51 active personnel. In fact, this next year will be the first time the pension payments for those employees will come out of that fund (hence the increase in the subsidy).
“All the positions that are being eliminated are general fund positions. Even with those eliminations, police and fire expenditures still account for 62 percent of the general fund.”
Analyzing the Merits
While much of what Branch states is true, I would argue that more indeed can be done; and basically, it begins with political courage at the bargaining table – present the option of rescinding Public Act 78 again, or invoke bankruptcy by incorporating accurate accounting methods into the picture – or better yet, pass laws that prevent double-dipping from government employees receiving pensions and then doing outside contract work for government.
City government in Saginaw is sadly riddled with scandal which this publication has in many instances uncovered and or reported about over the past three decades, ranging from millions of dollars spent on The Downtown Convention Center & Hotel that is now slated for demolition to financial creativity that allowed $1 million from the city water fund to be used for building the Andersen Rose Garden. Indeed, there are many ways local entities can play around with the notion of ‘dedicated’ funds.
Back in 2007 the ICMA issued a report that recommended the Fire Department use its large amount of non-committed staff time to assist the police department that has largely gone unheeded. Why? Again, it comes down to a lack of political courage, conviction, or desire by bureaucrats to turn off the spigot that has turned the notion of public service into one of careerism.
For two decades now there has been ‘talk’ of merging public safety across the expanse of Saginaw County. Yet we still have 17 police departments that spend well over $33 million on law enforcement. Wouldn’t it be logical to consolidate and infuse more dollars cost effectively into putting more officers and personnel on the street? Of course it would. But again, it takes courage and wherewithal. Change will come sooner than people think. And it isn’t going to come from listening to those who have everything to gain and nothing to lose from gaming the system.
On these points, Branch had this to say: “While we might disagree on whether or not PA 4 would be a good thing or a bad thing for Saginaw, it’s a moot point, at least for now. Saginaw does not come remotely close to the conditions of “financial emergency” needed to trigger a state review under the law. We have the ability to ask for a review; they would tell us to go away. While some people here seem unable to get past the misdeeds and misappropriations of the past – they won’t cut any ice with the state. They’re going to look at five years with unqualified audits and no deficit and send us on our way.”
“I have no doubt that, in the end, we’re going to see some form of hybrid public safety delivery system,” continues Branch. “I don’t see the Kalamazoo model working here and I’m not a fan of it. I think we’ll see something more akin to Monroe, where there is a minimum full-time fire crew, on-call firefighters and cross-trained police officers who also respond. I want to mix in some of the Albany model, in which firefighters during downtime do inspections and code enforcement. And I’m quite sure we’re going to see some degree of service consolidation with other municipalities, particularly relative to fire.”
“I fully agree – we don’t need 17 police departments and it would be far more logical to merge them. But I can tell you that for every person like you and me in Saginaw who believes that’s what would be best, there are at least two dozen in Freeland, Shields and Saginaw Township whose attitude is “Screw the City. I got the hell out, and I don’t want a dime of money being spent there.” And that’s how they’ll vote when anything remotely related to it is put to a vote, at least until the cancer that began in the city metastasizes to their neighborhood, at which point the cynic in me thinks they’ll say, ‘Screw Freeland, I’m moving to Homer Township.”
“I’d say the challenge, if we were really interested in fixing things, would be not to remind people what stupid, shortsighted, irresponsible, even corrupt things have happened in the past. Yes, they may have gotten us and every other city in Michigan where we are. And it may satiate the provocateur in some of us to see the ensuring indignation those reminders cause.”
“But I can guarantee you: it won’t help convince a guy living in Thomas Township that it really is in his best interest to support a county-wide fire district and a metropolitan police force. Quite the opposite. And if you don’t have his support, none of the “logical” things you want to see will happen.”
Theodore Roosevelt once said that “In history many republics have risen and flourished and then fallen because their citizens lost the power of governing themselves; and in no way has this loss of power been so clearly shown as in the tendency to turn the government into a government primarily for the benefit of one class - a ruling class - as opposed to a government that exists to serve its people.”
Whether our cities, states, and nation can reclaim the notion of a government that exists principally to serve its people is the pivotal question we face in this election year.
info@review-mag.com
989-780-4162
May 31, 2012
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