Michigan Governor Rick Snyder on Wednesday unveiled a plan to drop the assumed rate of investment return for the state’s retirement funds to 7.5 percent from the current 8 percent.
The Republican governor said the change would be significant but prudent.
“We want to be conservative in making sure we have those resources for the people that earned those pensions and benefits,” Snyder told a joint House and Senate appropriations committee as part of his fiscal 2018 budget presentation.
He added that further reductions in the rate were possible if merited. Under the plan, the reduced rate for funds covering state workers, police, judges, and the national guard, would be immediate upon adoption by the state budget director and the retirement systems’ boards. A lower rate for the Michigan Public School Employees’ Retirement System would be phased in over two years.
The move would trigger increased pension payments by Michigan of an additional nearly $247 million in fiscal 2018, which begins Oct. 1, and $400 million in fiscal 2019, according to budget documents.
Snyder proposed a $56.3 billion all-funds budget, which includes $10.1 billion for operations and $12.3 billion for primary and secondary public schools.
On Monday, he announced a task force to formulate proposals by this spring for Michigan’s local government pensions and retiree healthcare. The total unfunded liability for healthcare is about $10 billion and the total unfunded pension liability is estimated at $4 billion for hundreds of local governments units that offer these benefits, according to Snyder’s office.
(Reporting By Karen Pierog; Editing by Tom Brown)