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BLM Releases Report Identifying Best Practices for Fiscal Stability

Unfunded Liability Reform, Strengthening Budget Management, Minimum Qualifications for Government Finance Officers Identified as Ways to Help Avert Fiscal Crisis
BLM Releases Report Identifying Best Practices for Fiscal Stability
Tuesday, Apr 18, 2017
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Download Fiscal Stability Report

LANSING, Mich.—Business Leaders for Michigan (BLM), the state’s business roundtable, today hosted a Leadership Summit on Fiscal Stability, bringing together business, municipal, state, and nonprofit leaders for an extended examination of state and local financial stability in Michigan and the steps needed to best position the state for long term prosperity.

The Leadership Summit included the following presentations:

  • an overview on the Financial Health of the States from Robert Zahradnik, Director of the Pew Charitable Trusts
  • the Impact of Unfunded Liabilities on a Community’s Ability to Fulfill its Promises by David Walker, Senior Strategic Advisor for the Global Public Sector Practice at PricewaterhouseCoopers
  • a Fiscal Review of Michigan’s Municipalities from Jeff Guilfoyle, Vice President of Public Sector Consultants
  • presentations by Michigan state Treasurer Nick Khouri and former state Budget Director John Nixon
  • and panel discussions on Fiscal Best Practices and Securing a Stable Future for Michigan.

In conjunction with the Summit, BLM released a new report, Business Leaders’ Insights: Ensuring Long-Term Fiscal Stability for Michigan.  The report offers an analysis of state and local governments’ current economic status, and highlights the steps needed to make Michigan governments “recession-proof.”

“Business leaders looking for places to locate or expand operations often consider the stability of government financial operations as a key factor,” said Doug Rothwell, BLM President and CEO.  “Michigan has made considerable progress recovering from the recession of the early 2000s, but many challenges remain.”

According to the report, 11 Michigan cities, one county, and 41 school districts continue to experience severe fiscal distress.  Much of the current distress is a direct result of the so-called “lost decade” in the early 2000s, and is related to unfunded liabilities.  Michigan taxpayers currently owe $25 billion in unfunded school pension liabilities and another $3.6 billion in unfunded municipal pension liabilities.

The report highlighted Best Fiscal Practices that could be put in place to prevent additional financial crisis in state and local government, including:

  • Promoting economic growth – Prioritize policies that improve the long-term economic growth prospects of the state
  • Addressing legacy costs and unfunded liabilities
    • Move all new public employees into defined contribution pension plans
    • Conduct a full strategic review of pension plan assumptions
    • Do not provide other post-employment retirement benefits to new employees
    • Require all eligible retirees to participate in Medicare
    • Pay retirees a fixed stipend, rather than paying premiums
  • Preventing local government fiscal emergencies
    • Create a local government finance commission
    • Set minimum fund balance guidelines
  • Enhancing finance certification and professional development
    • Require city, county, and school district CFOs to have, at a minimum, a bachelor’s degree in business or other appropriate education
    • Empower retired CFOs to serve in an interim capacity and provide mentoring services
    • Provide scholarships to help support the training of finance officials from fiscally struggling governments
  • Strengthening state fiscal and budget management
    • Adopt performance based budgeting
    • Develop and publish a multi-year state fiscal plan
    • Publish a citizen-friendly balance sheet

“If Michigan local governments and school districts are struggling during an economic expansion, there is reason for concern that many others would quickly find themselves in significant financial trouble during a future recession,” said Rothwell. “Business Leaders for Michigan and its partners look forward to discussing and helping to implement next-generation policy and practical changes to prevent that from happening.”

Materials from the event can be found at:  https://businessleadersformichigan.com/event/fiscal-stability-summit/

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