County Struggles To Get Accurate Picture Of Budget

Grand Traverse County administrators are calling on legislators for help in the wake of a new report that projects the county’s pension debt is significantly higher than previously estimated. Both the pension debt and the county’s projected general fund shortfall in 2017 will heavily impact budget decisions this fall – even as officials continue to grasp for accurate numbers for both.

Pension
A new report from accounting firm PricewaterhouseCoopers indicates Grand Traverse County’s pension debt is “far more serious” than initially anticipated, according to County Administrator Tom Menzel.

The report was commissioned by the Grand Rapids Area Chamber of Commerce and analyzes retirement plans in seven Michigan communities, including Ann Arbor, Grand Rapids, Grand Traverse County, Kalamazoo, Lincoln Park, Port Huron and Saginaw. The findings were presented at a West Michigan Policy Forum last week in Grand Rapids. Menzel served as a panel guest at the forum.

Grand Traverse County’s pension provider, Municipal Employees’ Retirement Systems (MERS), estimates the county owes $45.8 million on its pension plan. The figure is expected to grow to $51.2 million by the end of this year, leaving the county only 45 percent funded on its plan. MERS’ figures, however, are based on an assumed rate of return of 7.7 percent. In its report, PricewaterhouseCoopers estimates a more realistic rate to be half that amount, or 3.4 percent – putting Grand Traverse County’s debt closer to $62.3 million. Under the firm’s analysis, the county’s plan is only 32 percent funded.

“It is such a serious problem across the state that state action must be taken,” says Menzel, pointing to a pattern of Michigan communities who are in “high risk” situations due to mounting pension debts.

In letters this week to Rep. Larry Inman and Sen. Wayne Schmidt, Menzel called on legislators to “take a leadership role in crafting legislation that will help us and other local units of government solve this critical issue.” Menzel proposed passing legislation that would limit the pension multiplier, require mandatory employee contributions to defined benefit and defined contribution plans, eliminate buy-back provisions, and create a state revolving loan fund “dedicated solely to pension and OBEB (other postemployment benefits) liabilities.”

Without legislative action, Menzel says communities across Michigan – including Grand Traverse County – will be forced to “cut back or eliminate existing (services)” to fund their pension plans. “We need more tools to solve this,” he says. “I will ask our local representatives in the House and Senate to take a leadership role in bringing these issues up for public debate and follow-up legislation.”

Schmidt and Inman did not return requests for comment.

Budget
Also as part of this fall's budget process, officials will attempt to reconcile conflicting external and internal estimates about the county’s projected general fund shortfall in 2017.

Estimates provided by accounting firm Rehmann Group project a $4.1 million deficit next year. But at the request of officials including Sheriff Tom Bensley and Thirteenth Circuit Court judges Philip Rodgers and Thomas Power, County Treasurer Heidi Scheppe took a closer look at the numbers and calculated her own projected shortfall of just $671,000.

On Wednesday, Menzel sent a memo to CPA Steve Peacock of Rehmann Group asking that he and Scheppe work together to come to an agreed-upon projection for next year. Menzel said that Scheppe’s significantly reduced estimate “has caused confusion among the employees and made it more difficult for the county in dealing with financial issues in upcoming union negotiations.”

In response to the memo, Scheppe informed Menzel that Peacock had contacted her and provided “his documentation and assumptions," noting the firm's calculations were labeled as general fund but included figures beyond the general fund. "So I am trying to work through the numbers to determine the difference," she wrote. Scheppe said she would keep Menzel “updated on when we come to an agreement” on the county’s projected shortfall for 2017.