The Citizen’s Research Council of Michigan (CRC) has released its latest report, Michigan State and Local Government Retirement Systems, which:

• describes Michigan’s 138 state and local pension systems in aggregate,
• explores the financial and managerial state of Michigan's public retirement systems,
• provides details for several of Michigan’s major state and local public pension systems,
• compares key metrics to national averages, and
• explores the possible ramifications of the current economic situation on public defined benefit plans and on state and local governments.

At the end of fiscal 2007, state and local retirement systems in Michigan had assets of $105 billion, but these assets were severely affected by steep losses in the stock market, real estate market, and other investments in 2008. While comparisons of pension plans are complicated by different reporting periods, assumptions, smoothing and amortization periods, pension portfolio losses of 20 percent to 25 percent translate into reductions in total state and local pension assets in the range of $21 billion to $26 billion.

The 1963 Michigan Constitution protects the pension benefits that have been earned by state and local government employees and requires that state and local governments fund retirement system benefits in the year those benefits are earned. Nonetheless, most defined benefit retirement systems had substantial unfunded accrued liabilities before the 2008 losses; a large number may now be expected to have fallen below the generally accepted 80 percent funding threshold.

The vast majority of the 742,000 members of 138 state and local government retirement systems in Michigan are participants in defined benefit retirement plans. Accrued liabilities in these plans are unchanged by the losses in plan assets. Public officials including pension plan trustees and managers will struggle to balance constitutional obligations to fund public employees' retirement systems with the need to maintain public services, especially as tax revenues reflect the weak economy.

Michigan State and Local Government Retirement Systems reports on the shift to defined contribution plans, which limit the public employer's liability by transferring risk to the employee. It also reports on the balance of investment earnings, employer contributions, and employee contributions in public retirement plans; pension payments and expenses; pension board composition; pension funding strategies; the relationship of pension and other postretirement benefits; adjustments to benefits earned in the future; and potential changes in investment rules and practices.

The report and a summary description can be accessed on the CRC website.

The Citizens Research Council of Michigan is a private, nonprofit public affairs research organization established in 1916 to analyze issues of significance to state and local government organization and finance in Michigan.