(Detroit) – Wayne County taxpayers are on the hook for $600 million in unfunded pension obligations – a pension fund which was fully funded when Ficano took office in 2003. Ficano blames a weak stock market, but other counties dealt with the same stock market and are in much better shape.
According to recent projections, Wayne County only has 60% of the funds on hand needed to cover retiree costs from the pension plan, while Oakland and Macomb Counties are fully funded. To cover the costs of fully funding the plan, the county is going to have to borrow money by issuing bonds.
However, the bond rating for Wayne County is just above junk status, which means the cost to borrow that money is going to be quite high. The only other option is to raise property taxes and cut services.
The financial problems are due to the change in retirement age from 65 to 60, and a 13th monthly check that retirees get each year which is responsible for over $250 million in losses since implemented.
Currently, Wayne County is sending checks to over 5,600 retirees, with just under 2,300 actually paying in to the system. Another contributing factor was Ficano’s decision to allow employees in 401(k) plans to buy back into pension plans which are much costlier to the county.
To make matters worse, Wayne County is also facing a $1.5 billion shortfall for the health care of its retirees. That brings the total owed by Wayne County to $2.1 billion, an amount that will be almost impossible to raise by increasing property taxes alone.
The county has put together a plan to pay down the debt by shifting state grant money over to service the debt. The State Treasurer has promised to consider it only after a full audit is done on the financial health of the county.