A federal judge Tuesday ruled Detroit could file Chapter 9 bankruptcy. Thousands of workers are wondering whether the federal bankruptcy court will wipe out some or all of their retirement pay, which averages $19,213 annually.
Meanwhile, a small group of state officials live in a far different universe: They collect both a sizable paycheck for their jobs, plus large constitutionally guaranteed lifetime pensions.
As a result, the highest paid employee in the Governor’s Office isn’t Rick Snyder, who is paid $159,000 a year. Snyder’s chief lobbyist, Dick Posthumus, collects more than $270,000 from the state treasury for his 16 years in the Legislature and four years as lieutenant governor — a $170,000 salary and a $100,000 pension.
When he was hired by Snyder, Posthumus said he was told the law didn’t allow him to forgo the pension. In an interview, he noted that the Legislative Retirement System, which is operated separately from the State Employees Retirement System, is self-funding: Participating lawmakers paid 7 percent of their salaries into the system.
Retirement contributions by classified state workers were eliminated in the 1970s in lieu of a pay increase to save the state money.
The state official who filed the Detroit bankruptcy — Attorney General Bill Schuette — is one of those who draws both a six-figure salary and a five-figure pension: $112,410 as attorney general and a $39,237 legislative pension. That makes his total state compensation roughly the same as Snyder’s. Schuette’s office did not respond to requests for an interview.
When he turns 62 in two years, Schuette will be eligible for a second government pension for his three terms in Congress. He could eventually qualify for two more government pensions: one for executive branch service as attorney general and agriculture director and another for six years on the state Court of Appeals. While arguing the state’s case for Detroit bankruptcy, Schuette is simultaneously defending the Detroit municipal pensions, supporting the contention of retirees that their retirement benefits are guaranteed by the Michigan Constitution.
Since October 2007, most state retirees have been prohibited by law from collecting both a state pension and salary. The 2007 law has been modified several times since to allow limited exceptions: corrections officers, assistant attorneys general and retirees hired for part-time positions.
Changing branches of government is one way to legally double-dip. A second way is to move from one level of government to another. Four area public officials benefit from multiple government checks every month as a result of moving up:
• U.S. Sen. Debbie Stabenow, D-Lansing, and U.S. Rep. Tim Walberg, R-Tipton, were both paid $174,000 for their federal jobs and also receive state pensions of more than $60,000 for their time in the state Legislature and are eligible for free lifetime medical coverage.
• State Rep. Tom Cochran, D-Mason, receives more than $84,500 in retirement benefits as Lansing’s former fire chief.
• State Sen. Rick Jones, R-Grand Ledge, supplements his state legislative salary with a $50,000 pension from Eaton County for 31 years in the Sheriff’s Department. State legislators are paid $71,685 plus an annual $10,800 expense allowance.
Pension amounts were provided in response to City Pulse Freedom of Information inquiries to the State Employees Retirement System, Judges Retirement System, Legislative Retirement System and city of Lansing.
Jones noted that his pension was funded with large deductions from his salary: 14.5 percent of his gross pay as a deputy, 16.5 percent when he became a command officer and 23 percent when he was sheriff.
“I put a great deal of money into the system. It was required, so I don’t feel bad about accepting the compensation,” Jones said. He added that he has also declined county-paid health care benefits.
State legislators no longer receive pension benefits or lifetime medical coverage. Beginning in 1997, the Legislature converted to a 401(k) retirement program. Lifetime medical benefits have been eliminated for any lawmaker first elected after 2006. Jones has been campaigning to change medical benefits for legislators elected prior to 2006 so that their share of health care premiums is the same as for other state retirees.
Former Senate Majority Leader Art Miller, D-Warren, receives the largest legislative pension at $121,200 annually for nearly 26 years service. A classified state employee in the old defined benefit system with 26 years of service would be paid 39 percent of the average of his or her three highest-paid years. At Miller’s top salary of $79,650, that equates to a pension of $31,000. His actual legislative pension is four times that amount.
While no new members are being added to the Legislature Retirement System, 282 former members or survivors continue to receive pensions and full medical coverage, although most of them are now covered by Medicare. Thirty-six receive pensions that are greater than the current legislative salary. The average legislative pension is $45,400.