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As Grand Traverse County faces fiscal crisis, some employees collect retirement benefits

Grand Traverse County

Grand Traverse County’s financial problems have reached crisis level. The county administrator says an emergency manager would be the next step, if the county can't get its financial house in order.

A big part of the problem is there’s not enough money to fund retirement and health care promises made to former employees.

An attempt to solve the problem years ago backfired when a group of employees took generous early retirement plans. Now, while county officials scramble to get out of the financial hole, a group of 11 county employees is collecting full retirement benefits while still working for the county.

Tammie McLain started working at the Grand Traverse County courthouse back in 1980.

“I started out in the main office, doing everything … tickets, bonds, answering the phone,” says McLain.

McLain worked her way up over the years. She became a civil clerk in mid-1980s – and then a court recorder.

In the early 2000s, McLain wasn’t thinking retirement. She was only in her 40s and still had kids in school. But the county offered her and several other long-time county employees a pretty sweet deal to retire early.

"It's not an unusual phenomenon, but it can be an expensive one to the government if the pension system is underfunded." - James Hohman, Mackinac Center for Public Policy

“My understanding of it was they didn’t want to be paying out these large amounts of money to people every year that were on the defined benefit plan,” says McLain. “So, they encouraged us to take this window. I ended up taking it in 2004.”

McLain retired, technically, but she never stopped working for the county. She’s one of 11 county employees who are collecting retirement benefits and a full salary.

A short-sighted plan

“It’s not an unusual phenomenon but it can be an expensive one to the government if the pension system is underfunded,” says James Hohman from the Mackinac Center for Public Policy.

Hohman studies issues around under-funded pensions.

And Grand Traverse County’s pension system is severely underfunded. The Municipal Employees Retirement System says it’s the lowest funded system in Michigan.

Back in the early 2000s, when the county was offering early retirement to Tammie McLain and others, they were trying to save money. To do that, they wanted to scale back the benefits they were offering. That meant getting employees off the old, generous pensions.

But Hohman says it was short-sighted.

“From the perspective of the county, if they’re running short of money in the general fund, what they can do is essentially offshore some of those expenses to the pension system,” he says. “So that allows you to kind of juggle these things but what you’re not accounting for is that the pensions have not been paid for and that’s going to continue to press the general fund for years to come.”

Basically, the “early out” plan made some sense because Grand Traverse County wouldn’t have to pay into the old pension plans anymore.

Hohman says the plan would’ve been fine if the county had set aside enough money to fund all those pensions. Instead, they made the problem worse because the employees who took the early out were not paying into the pension system anymore.

“For the most part, it’s very difficult for our governments to get into fiscal trouble,” says Hohman. “We have balanced budget requirements. We have all sorts of things that are there to ensure that governments are able to pay for the promises that they make. However, these pension systems have gotten to the point where they’ve been promising all these benefits and haven’t been setting aside the money necessary to pay for it.”

An attempt to keep "key people"

“I’ve inherited what I inherited,” says Tom Menzel, who took over as Grand Traverse County administrator last year.

"If you look at your retirement benefits versus your wages that you would make while working, there wasn't, in our case, a very large difference." - Sheriff Tom Bensley

Menzel is trying to fix the county’s financial mess. He was surprised when he took the job to learn that several current employees were collecting retirement.

Menzel says that decision has now put the county in a bind. That’s because the county is paying retirement benefits – under the old, generous plan – to people who retired much earlier than normal.

But Menzel figures the deal was offered partly to keep important employees around.

“They were key people and I think there was concern that if they didn’t offer some incentive or some kind of reason for staying, they would lose key people and wouldn’t be able to function,” says Menzel.

Sheriff Tom Bensley is one of the retired employees who still works for the county, although his situation is a little different. Bensley spent 27 years with the sheriff’s department, working as a road patrol officer and then supervisor of the marine section.

In 1999, he decided the financial incentive to retire was too great to ignore.

“If you look at your retirement benefits versus your wages that you would make while working, there wasn’t, in our case, a very large difference,” says Bensley. “Number two, I had a young family. I spent a lot of time with my two younger daughters. It gave me the opportunity to do that.”

In 2008, Bensley was elected sheriff and came back to work for the county.

Bensley and Tammie McLain both say they’re not accruing any new retirement benefits on top of what they already collect. The other nine county employees who collect retirement benefits did not respond to requests for comment for this story.