ISHPEMING, Mich. (WZMQ) – Municipal retirees of Michigan are seeing some relief in their pension, this, coming from the announcement from Governor Whitmer on a pension grant. On Wednesday, the Governor announced that 123 Michigan communities were awarded $550 million in Protecting MI Pension Grant awards, aiming to put money back to retiring city and municipality employees.
Marquette City Manager Karen Kovacs commented that Legacy costs are an important piece of funding for the deserved community but are still a challenge within the budget. “There’s really quite a few laws going into protecting the pension system so their pension is secure but this is really saying their funding for it is stable,” commented Kovacs.
This program allows municipalities who are under that threshold of 60% in its municipal employees retirment system to get up to that funded portion to meet the 60%.
“The city there MERs pension system was at 58.9% just shy of that 60%,” continued Kovacs. Due to pensions being invested into the market, the valued amount at 60% can change when the market shifts. “So it’s allowing for those resources to be utilized to put towards funding that and then frees up a little bit more of the general fund dollars eventually for other city services or other employee services or needs,” commented Kovacs.
The Ishpeming city manager, Craig Cugini, commented that the payments that were being made on pensions were costing the city more money than expected because of interest rates fluctuating. “What we were seeing is as a cost to the city an exponential growth in annual payments to ensure that our municipal employees past and present have a pension when they retire,” explained Cugini.
In 2020, the City of Ishpeming chose to begin selling municipal shares to investors at a low-interest rate through a Pension Obligation Bond, allowing them to secure pensions for municipal employees of Ishpeming. “What we did is we secured it at a 1.3% interest rate and so over the life of the bond we project a savings of about $5.3 million to the residents of the city of Ishpeming,” continued Cugini.
When the state announced the grant, Ishpeming was still eligible as an underfunded municipality to receive funds. “The state told us we were eligible so we applied for the funds and recieved $1.7 million which will go into that same pension program, which will demonstrate longer-term savings to the community and the money goes straight from the state to the pension,” continued Cugini.