Can East Lansing simply not pay what is now owed on its pensions?
Can the City of East Lansing's leadership simply decide to stop paying pensions or reduce what the City owes on existing pensions?
No. The Michigan Constitution protects existing pensions of state and local public employees. Article 9, Section 24 states, “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.”
Therefore, East Lansing cannot eliminate or reduce the portion of its pension obligations that are “accrued financial benefits” payable to the more than 60% of its pension participants who are vested or have started receiving benefits. This constitutional protection also applies to the part of pension benefits that already have accrued to current employees.
The City can make certain changes aimed at reducing costs of future pension benefits of current employees and new hires, but, for most employees, it cannot make such changes unilaterally (without the unions' cooperation) because pension benefits, along with wage increases, are part of contractual agreements that are negotiated between the City and unions. About 80% of East Lansing’s employees are members of unions.
All of East Lansing’s seven collective bargaining agreements end in June 2019. It would be highly unusual for both sides to agree to reopen negotiations on this issue before the contracts are up for renewal.
Employees who are not in union positions must agree to any change in their accrued benefits, but the City can change the designs of their pension plans moving forward.
This article is part of a larger investigation of East Lansing's pension plans; click here to read the lead article for that investigation.
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