Inside208

House Passes $1.15B Municipal Pension Debt Relief Grant Program

Posted on March 1, 2022 by Dene Westbrook

By a vote of 71-33 the House of Representative passed HB 5054 that would provide $1.15B in state general fund resources will be utilized to provide direct assistance to municipalities to help pay down municipal pension debt.  There will be two parts to the grant program, $900M will be utilized to get all pensions that are less than 60% funded up to 60% funded, and $250M will be provided to pensions that are 60% funded or greater.

The legislation first saw action last Thursday in House Appropriations committee. Click here to view our blog on the introduction and details of the bill.  Since committee action, the bill has seen a few changes and those are highlighted in the lists below. This bill now heads to the Senate and we will be working closely with them to secure passage of this legislation.

Changes to House Bill 5054 Include:

  • Further defines that the most recent mortality tables may also be adjusted based on experience studies as well.
  • Require retirement systems to comply with Uniform Actuarial Assumptions within 5 years of receiving the grant funds rather than immediately.
  • Clarifies that benefit enhancements must be 100% pre-funded and that increases to wages and salaries are not considered a benefit enhancement. The update also removes the 10-year cap to benefit enhancements.
  • Clarifies that the grant funds available to pension systems above 60% funded can use the grant funds for pre-funding retiree health care benefits.
  • Clarified how any excess grants funds can be distributed to pension system below 60% funded.  If by August 31st there are still funds remaining, then the cap to an individual local unit does not apply when funds are redistributed.
  • Other technical changes include:
    • Changing “qualified retirement system” to “qualified retirement systems” to address plans that have more than one retirement system.
    • Change the “as of December 31, 2021” date to “the most recent fiscal year ending on or before December 31, 2021” to address systems that are on a fiscal year basis.
    • Clarifies that the City of Flint can stay on its current pension amortization schedule.
    • Defines what Retiree Healthcare pre-funding means.
    • Clarifies in the definition of a “Qualified Retirement System” that the funded ratio only applies to pension funds.

We continue to strongly believe this is a significant step forward and a direct reflection of our efforts over the years highlighting the need to address our municipal finance system.

To view our statement on the passage of this bill click here.

We will continue to share more information about potential action on this bill in the Senate as it becomes available.

John LaMacchia is the League’s director of state & federal affairs. He can be reached at jlamacchia@mml.org or 517-908-0303.

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