Flint, Michigan’s lead-contaminated water is grabbing headlines around the country, but a critical part of the city’s desperate situation is being overlooked: The role of costly public pensions.
The immediate cause of Flint’s crisis is obvious. In April 2014, Flint stopped using Detroit’s water system and start drawing water from the Flint River for the next two to three years before joining the under-construction Karegnondi Water Authority. The decision, made by Flint’s then-emergency manager Edward Kurtz, was expected to save the city about $5 million. But the river’s water corroded the city’s aging pipes, causing lead from the pipes to poison the water, leading to an ongoing disaster which could cost the city and state billions.Blame has been directed in many directions. The New York Times criticized Michigan Gov. Rick Snyder, who appointed Early, as well as the state’s health and environmental quality departments, which likely could have stopped the catastrophe and failed to do so.
But why was the city in such dire financial straits that it had to penny-pinch on its water supply by using the Flint River for several years? One critical reason is the beleaguered city’s immense pension burden.
Flint’s problem is fundamentally one of money. The city was the birthplace of General Motors and once had a thriving economy based on the auto industry, but those days are long gone and Flint is now known for its deep poverty (40 percent of the population is impoverished), urban blight, and high crime. As a result, Flint’s population has fallen sharply from about 200,000 in the 1960s to under 100,000 today. The economic downturn combined with a drop in population has unsurprisingly severely restricted Flint’s tax revenues.
What hasn’t been restricted much, though, are the pension demands of Flint’s former workers. Flint has about 1,900 government retirees, who outnumber actual city employees three to one. A glance at the city’s financial forecast from spring 2015 shows that, within the city’s general fund, pensions and retiree health care dominate 33 cents of ever dollar spent, with the figure expected to hit 37 percent by 2020. When all city spending (including various special funds) is put together, retirees are taking 20 percent of all spending. And of course, pensions aren’t simply a future problem, as a persistent inability to balance its budget also explains why Flint was in a declared financial emergency in the first place.
The situation would likely be worse, except the city has hiked taxes in a variety of ways to stave off fiscal collapse. It’s also tried frantically to slash retiree costs, with limited success so far. In 2012, emergency manager Michael Brown made cuts to the city’s retiree health benefits, attempting to save about $8.5 million over two years. But a lawsuit by six retirees resulted in a temporary injunction against the move in early 2013, just a few months before the decision was made to switch to the Flint River for water. A federal judge only reversed the injunction, citing the city’s desperate financial condition, in July 2014 after the switch was made.
Pensions by themselves didn’t cause Flint’s current crisis. But they played a substantial role that should not be ignored, especially by other struggling cities that could find themselves in similar situations in the future.
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