ALPENA – Pensions for current and future municipal retirees in Alpena, Alcona, Montmorency and Presque Isle county were less funded in 2018 than they were in 2017, according to an annual report recently released by Municipal Employee’s Retirement System.

Statistics from the report show that Alpena County’s pensions went from being 62.6% funded in 2017 to 62.1% funded in 2018. That means if all benefits were claimed today, about six out of 10 retirees would receive what they are owed.

Those statistics also showed Alcona County’s pensions went from 68% funded in 2017 to 67.1% funded in 2018, that Presque Isle County’s pensions went from 67.9% funded in 2017 to 65% funded in 2018 and that Montmorency County’s pensions went from 55% funded in 2017 to 54.5% funded in 2018.

Because Montmorency County’s pension funds fell below 60% of liabilities, county commissioners were required to submit a corrective action plan to the state.

Commissioners are also gathering more information about pursuing a bond sale, which would stabilize their payments toward pension debt. The further behind a government is on its pension debt the more it must set aside each year to catch up.

Commissioner Daryl Peterson previously told The News commissioners “are looking at changes to the MERS retirement program.” Montmorency County employees currently have a defined benefit plan – or pension – which means that the retirement benefits are guaranteed.

Commissioners were keeping an eye on Rogers City, where city council members decided to issue bonds. Rogers City was ultimately able to obtain an AA credit rating, which allowed them to issue $5.7 million in bonds over a 20 year period at an interest rate of 2.8%.

The bond, which Mayor Scott McLennan likens to a loan, will help stabilize the city’s payments to MERS. McLennan estimates the city’s unpaid liabilities are now funded at 95%, compared to being funded at 48.5% in 2017.

In addition to issuing bonds, city council had to eliminate the pension plan for future employees and replace it with a 401(K)-style retirement plan for all new employees hired after July 1.

Mayor Scott McLennan said city officials had looked at their projections and understood they were in dire straights, which is why they decided to pursue the bond. He also understands Rogers City will not be the last to resort to issuing bonds as a way to overcome pension debt.

“Those communities that continue to have that pension plan are going to continue to struggle to meet those obligations over the coming years,” he said. “There isn’t any doubt in my mind.”

James Hohman, director of fiscal policy for the Mackinac Center for Public Policy, said the state constitutional standard is that pensions should be paid when they are earned and that pensions are legally binding debt. He said when a government’s unfunded liability rises, it largely means they have accidentally made their employees their creditors.

Hohman said there is no easy solution to pay down that debt. He said governments need to take pension debt seriously to make up the difference of what they saved and what they owe.

“Governments should really look to prevent themselves from racking up pension debt in the future,” he said. “That means using lower discount rate assumptions, more accurate assumptions about what employees are going to owe and how long they’re going to collect and they should definitely consider converting to plans where they can’t accidentally make their employees their largest creditors.”

While some communities are struggling to repay their debts, there are a few governmental agencies in the region who are either close to being fully funded or are fully funded. The City of Onaway is 88% funded, up from 83% funded in 2017, and the Alpena County Housing Commission is 102.7% funded, up from 101.2% in 2017.

Crystal Nelson can be reached at 989-358-5687 or cnelson@thealpenanews.com.