Michigan is facing a looming problem that is already affecting our schools and all levels of state government. This problem is our state’s unfunded accrued liability (UAL), also known as “legacy costs.” These costs are the difference between the retirement benefits promised to or earned by public employees and the amount of funds available to provide them.
Due to a variety of reasons, Michigan’s public school and state employee retirement systems have an unfunded liability of more than $62 billion, a figure that is $10 billion more than the entire state budget.
A good illustration of the problem is to look at legacy costs for the current fiscal year as a percent of payroll. In the State Employee Retirement System, the annual payment toward UAL costs is more than 37 percent of total payroll. In fact, the legacy costs for the Department of Corrections are more than $23,000 per full-time employee. Continue >>>