Praying for structural change
Submitted by murph on 3 March 2007 - 11:42am. ann arbor | auto industry | budget | cities | health care | michigan
About 18 months back, Ann Arbor's Mayor Hieftje held a session of his public policy class entitled "Is Ann Arbor overrated?", with various blogger guest discussants. He commented that the cities of Michigan are lined up and running towards a cliff of fiscal crisis. Yes, all of them - Ann Arbor's more or less bringing up the rear, but it's running the same direction as all the rest. Some cities have already gone over - Flint, Highland Park, Hamtramck - and have survived the fall with various degrees of injury. Detroit's just a matter of time, and not much of it. But many people are hoping that Ypsilanti will serve as a bellwhether of Michigan's fiscal problems and a catalyst to change, as Ypsi is recognized across the state as being much more well-run than its predecessor's into crisis. When well-run cities start going over the brink, this theory states, people will finally realize that something's broken, and that it's not just Flint. I've since heard basically this same view echoed by a number of other regional and State leaders - when Ypsi goes, that's when our State can be expected to decide there might be a problem with our municipal structure. Thanks, guys. We love you too.
At any rate, it's once again time for Ann Arbor's biennial budget process, and the news is bleak. If Ann Arbor's bringing up the rear of the pack, the pack's a lot tighter than I'd thought. (Granted, Pfizer's departure is a new factor - previous estimates of A2's finances didn't include estimates of the kind of catastrophic plant closing that has become de rigeur for Michigan's more classic industrial cities.) Here's just the most recent indicator, from today's A2 News - City retiree health care bill growing.
I'm surprised the headline is so calm, considering the lede:
Backed into a corner by a looming retiree health care bill, Ann Arbor city officials say their only options may be mass layoffs, seeking a property tax increase or borrowing money by selling bonds.
According to actuary reports, the city faces a projected $50 million deficit over the next 10 years for pension and retiree health care costs that will have to come out of the city's general fund.
Tom Crawford, the city's chief financial officer, said another potential $20 million would have to come out of operating expenses to continue putting money into the retiree health care fund the city started about nine years ago.
None of the solutions I've heard mentioned are all that great.
- Mass layoffs? I seem to recall that Ann Arbor's already cut its workforce by 20% or so in the last 5 years alone. Obviously, that hasn't fixed the problem.
- A retiree health care property tax? "[C]city officials say it's unlikely voters would support another tax. The city already levies a 2.0-mill property tax to help pay for its employee benefits."
- Issue $100m in bonds to cover the liability and hope the bond interest is enough? Hmmm...
- Engage in union busting? "City Administrator Roger Fraser said three of the city's eight unions have agreed to cost-sharing for health care that will carry over into retirement," but will that really be enough? I've certainly heard outright union-busting prescribed for all the ills of various cities and school districts, and mentioned as a possible advantage of receivership - but I also know enough labor history (besides coming from and marrying into union families) that I can't condone that solution.
This is all, of course, a familiar story. With the Detroit News recently reporting that GM's health care costs are expected to hit $2,000 per vehicle in the upcoming years, "get the unions!" has become a pretty common refrain. Personally, I'd prefer a solution that would reduce our highest-in-the-world-as-share-of-GDP health care costs while not involving a further dismantling of the middle class. Considering how hard it was to get where we are today (see "labor history", supra), it would be a shame to just shrug and give it all up unquestioningly, dismissing as unacceptable solutions shown to work, just because "that's not the way we do things."
(In related topics, consider the EU-wide push to dramatically increase fuel-efficiency, already 30% better than Big 3's. We insist that it can't be done, that trying would create our demise at the hands of overseas manufacturers, while failing to realize that they're outperforming us because they've already done it. Whoops.)