Lansing Politicians Put Favored Businesses Ahead of Everyone Else

Another $1.2B in favors approved this year

State lawmakers passed two programs this year to give the businesses they select taxpayer dollars. It’s the kind of policy that tells regular people that they don’t matter while the important people get to play by their own rules.

Our laws are supposed to set the guidelines for everyone to follow. These programs, by contrast, give the favored few an advantage. This is disrespectful to the people that have to pay for those favors.

Some policymakers think the state needs to award business subsidies because other states offer subsidies. They are under the mistaken assumption that these programs work. The favors they bestow cost real money and have economic effects as well. At best, such programs don’t create jobs; they transfer them and hurt everyone else in the process.

It’s not just the expense that matters. Favoring one business with taxpayer dollars means that they get advantages over other businesses competing in the same market.

To Lansing politicians, these new favors are small. The selected business owners get to keep some or all of the income and sales taxes generated at their businesses and developments. And, the politicians argue, this is costless to taxpayers because these expansions wouldn’t happen without taxpayer dollars in the first place.

But that kind of thinking breaks down when the idea is applied universally. Offering everyone else the same deal would bankrupt the state. When everyone lives or works in a place in which the builder gets income and sales tax revenue, the income or sales tax revenue is only collected by developers.

This transfer from everyone to a favored few ought to frustrate more than just budget analysts. The teachers being asked for salary concessions and the firefighters having their shifts limited should be as mad about this as any taxpayer who must pay for these programs.

These giveaways rob local governments of tax revenue. And while local governments face other fiscal issues, the problems posed by these new laws shouldn’t be written off, either. The two new programs approved this year give away another $1.2 billion in addition to the $7.6 billion in already-approved business subsidies. And that is in addition to the $171 million in new subsidies approved by lawmakers in the state budget. If political leaders stop wasting money on these programs, they can go a long way to addressing other fiscal issues, whether it’s letting taxpayers keep more of their own money or rebuilding roads.

Getting rid of the giveaways that are ineffective and unfair to residents and businesses alike would go a long way to making us a state where people are put ahead of the business of awarding favors.

Let Local Schools Decide Their Calendars

More districts seeking freedom from Labor Day mandate

An increasing number of school districts want to open their doors to students in August. This growing demand provides further justification for ending the requirement that districts ask state bureaucrats for permission to start the academic year before Labor Day.

The Detroit News reported that the number of local school districts, intermediate school districts and charter schools seeking calendar waivers from the Michigan Department of Education nearly doubled – from 67 in 2016 to 123 this year. The number of districts affected could be much higher since the 24 waivers obtained by intermediate school districts are available to all the districts within their boundaries.

The state law setting Labor Day as the default school start date was only adopted in 2006. Recently, there’s momentum to roll back the mandate.

There is some evidence that making summer breaks shorter prevents disadvantaged students from falling further behind their peers. But overall, as with many education policy proposals, the research is inconclusive. A year-round calendar may help some students learn more, but it hasn’t shown signs of causing harm.

Unless you count the state’s tourism industry, which says the 11-year-old law has boosted hotel occupancy and revenues. Michigan Lodging and Tourism Association president and CEO Deanna Richeson was quoted in The Detroit News saying parents want to make vacation getaways during July and August. If so, they can persuade their local board of education to start school after Labor Day. Or they could seek to enroll in a neighboring district with a different calendar, or simply adjust their vacation plans.

There is no perfect solution to satisfy everyone, but educational concerns should take precedence over one industry’s concerns. And those decisions are best made closest to the families being served.

Most financial support for Michigan public schools comes from tax dollars collected and doled out at the state level, so state officials have some valid interest in setting education policies. But there is no compelling case that starting school after Labor Day generally benefits students, and some reason to believe otherwise.

Sen. Marty Knollenberg, R-Troy, has introduced Senate Bill 271 to ease Lansing’s pressure on school districts seeking more calendar flexibility. His bill would allow all schools to operate on Tuesdays through Thursdays in August, which would preserve long weekends for family outings up north while, at least in some cases, alleviating concerns about summer learning loss. SB 271 passed out of committee more than four months ago, and it has been awaiting action on the Senate floor ever since.

It’s telling that making such a modest proposed change to rigid education industry norms has proved to be a slow and challenging task. What, then, will it take to create an education system nimble enough to offer students statewide true personalized learning?

Let locally accountable boards decide on the schedules that work for their parents and educators. Together, maybe their diverse calendar decisions will lengthen the season for Michigan residents to enjoy our state’s natural beauty.

State of Michigan’s Great Lakes Invasive Carp Challenge

Crowdsourcing the state’s carp strategy

Photo via Flickr

On Aug. 1, the state of Michigan posted its Great Lakes Invasive Carp challenge on the Innocentive.com website. The announcement began:

The State of Michigan has appropriated 1 million dollars for a Challenge seeking to prevent the movement of invasive carp species into Lake Michigan from the Illinois River through the Chicago Area Waterway System (CAWS). The Seeker is looking for new and novel ideas to function independently or in conjunction with those deterrents already in place to prevent carp movement into the Great Lakes or other locations.

Reading through the challenge can be initially unsettling for two distinct reasons.

First, the threat of Asian carp becoming established in the Great Lakes should bother all of us. Two of the species grouped under the umbrella of “Asian carp” – bighead and silver carp – can grow up to 100 pounds and four feet long, and can eat as much as 40 percent of their body weight each day. Both species are so effectively intrusive that researchers compare them to cancer cells. When introduced into a lake or river system, their populations can grow so rapidly that they take up most of the available nutrients and space. Eventually, they push the native fish species out. Missouri’s Department of Conservation estimates that these carp species make up 95 percent of the biomass in some Missouri rivers.

If Asian carp become established in the Great Lakes, they could decimate Michigan’s fisheries and would have a significant negative impact on Michigan’s $2.43 billion fishing industry.

Second, the announcement suggests government may not be up to the task of stopping invasive species. While the Department of Natural Resources does have an invasive species plan, it doesn’t appear to provide an answer to the problem. That can be unsettling for those who believe that government should have answers to difficult management questions.

The economist Friedrich Hayek provides a word of caution and hope here. In his 1945 paper, The Use of Knowledge in Society, Hayek provides an interesting look at the idea that government can always have answers to important questions.

Knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. … The ‘data’ from which the economic calculus starts are never for the whole society ‘given’ to a single mind which could work out the implications and can never be so given.

He was saying that one person or group can’t possibly be the source of all wisdom on a given topic. And although we must admit that the knowledge dispersed throughout our population may not have the answer to the invasive species challenge, when pulled together in a coherent form, it is far more likely to contain an answer.

Faced with the reality that they have a legal and financial responsibility to tackle the issue, but have not yet solved it, DNR officials have reached out for help. They should be applauded for their willingness to crowdsource novel ideas for this challenge. Applying an economic incentive – in the form of a financial reward – may also help to encourage creative responses.

Using incentives to gather dispersed knowledge on an important issue is a far superior option to hunkering down and relying on a single entity – in this case the DNR – to possess all knowledge on invasive species. This $1 million expense appears imminently reasonable when weighed against the potential losses to Michigan’s fisheries if Asian carp do become established in the Great Lakes.


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Unions Try to Kill a Private Trade School

But Greater Michigan Construction Academy is a success

Greater Midland Construction Academy students in class.

Michigan high school students can spend part of their day in work training programs, often earning credits from community colleges. This is a win for schools — who may not have the resources to offer these opportunities — and a win for students — who get trained in a skill they enjoy and earn college credit at no cost to themselves.

When it comes to trades programs – typically, construction, welding and mechanics, among others – there are a variety of options. Students can go to local community colleges or district or county co-ops. In Mid-Michigan, many attend the Greater Michigan Construction Academy.

But the academy is a private program, run by the Associated Builders and Contractors. ABC routinely butts heads with construction unions. According to The Detroit News, the liberal interest group Progress Michigan helped launch an investigation into the academy for being an inappropriate work training program for public school students. From a News article:

But department staff met Tuesday and concluded “no evidence of fraud existed and therefore no district penalties will result,” spokesman Martin Ackley said. “From this point, [the Michigan Department of Education] will provide technical assistance to districts prior to the start of the school year on how to more accurately report and claim students utilizing these work-based programs moving forward.”

When asked if public funds were spent on a private program not approved by the state, Ackley said districts “often purchase private-owned curriculum programs.”

This issue has developed into a clear political fight, which is unfortunate because the focus should be about what is best for students. It’s clear that the construction academy is successful at what it aims to do.

Over the past three years, according to results provided by the academy, 77 percent of its students in the trades programs were successful. Out of 35 graduates of the program, 19 are employed in trades and eight are in four-year college (mostly in construction-related fields).

If districts could no longer contract with the academy, more students would have to rely on community colleges for this work training. In 2015, the most recent year data is available, community colleges in Michigan had a success rate of only 22 percent (a “success” is a student either obtaining an associate degree or leaving to attend a four-year college). Even after five years, fewer than 40 percent of community college students are successful.

“I was invited by Dow Chemical CEO Andrew Liveris and his government affairs team to sit on the Workforce Development Initiative that was convened by President Donald Trump as a result of the success of this program as a means to getting our young people access and opportunity into the skilled trades,” said Jimmy Greene, president of the academy.

It’s understandable that construction unions would want to hamper their competition. Their main policy fight with ABC is over the state’s prevailing wage law, which mandates union wages on construction jobs. But taxpayers should care about the results of programs, not who delivers them them.

(Jarrett Skorup sits on the policy committee of the Associated Builders and Contractors Greater Michigan Chapter.)


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How Michigan Could Benefit from District Voting

Joe Lehman discusses concept on MIRS podcast

Click for audio

What if lawmakers didn't have to travel to Lansing at all? What if they could just vote from home? That's the type of transformational change Mackinac Center CEO Joe Lehman suggested in an interview on the MIRS podcast on Monday, August 7, 2017.


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Measuring Success in Alternative Education

Programs serving dropout risks need meaningful metrics, too

In a vacuum of legislative leadership, the Michigan Department of Education is struggling to rate and report school quality in a meaningful and useful way. The challenge to getting good information is acutely felt by parents in Detroit, a city marked by poverty and institutional failure.

The proposed new method for measuring school performance improves upon the old Top to Bottom Rankings. But an important question has been mostly ignored in all the recent discussions about accountability: How do we judge the quality of schools specifically focused on rescuing troubled youth and giving them a second chance?

The latest version of Michigan’s federal school accountability plan indicates the state “has committed to developing a new, voluntary, parallel system of accountability for alternative education programs based on an application and relevant school demographics.”

Two prominent examples of alternative education programs that have seen success are Lighthouse Academy and Muskegon Covenant Academy. Based in Grand Rapids, Lighthouse is focused on educating young people who have been suspended or expelled, or just need extra help with a special education learning plan.

Amiah represents an amazing success story. She comes from a broken home and a rough, tragic and transient childhood, ultimately getting kicked out of her public school for fighting. When her situation looked darkest, she found help and support at Lighthouse Academy — including through the Jobs for Michigan’s Graduates program.

Lighthouse Academy, which is authorized by Ferris State University, also stepped in to provide schooling to abused, neglected and delinquent youth at northern Michigan’s nonprofit Eagle Village in 2016. Eagle Village ended its computer-based learning program through the local intermediate school district and partnered with Lighthouse to deliver more traditional classroom instruction. All signs point toward a much better learning experience for Eagle Village’s highly mobile residents.

“The results of this past school year make it very clear to us that we made the right decision,” says Cathey Prudhomme, president and CEO of Eagle Village. “We have seen improvements in our kids, the quality of their education is better, and we had two residents graduate high school. Also important, our kids actually prefer this way of doing school. They like being able to switch classes, have variety in their day, get up and move, and have some interaction with people. This is a much better solution for all of the kids we work with.”

Farther west, Muskegon Covenant Academy works with students who have dropped out, live on the streets or had encounters with the juvenile justice system. Through its close partnership with the Covenant Academies Foundation, the school provides a year-round caring, constructive environment and services tailored to their students’ unique challenges. The school uses a “blended learning” instructional model that enables students to work at their own pace, one course at a time, as they try to catch up on their studies.

Muskegon Covenant is the fruit of visionary founder Sam Joseph. Concerned for the plight of young people who had fallen through the cracks of the traditional district system, he launched alternative programs in Detroit and Grand Rapids before venturing into Muskegon. In January another Covenant Academy opened in Kalamazoo. Another is slated to launch next year in Saginaw.

Michigan’s current accountability framework gave both Lighthouse and Muskegon Covenant academies the lowest possible ratings in 2015-16 because students didn’t meet the state testing benchmarks for general education programs. But most of the youths enrolled at these charter schools, not to mention the dozens of other alternative programs run by conventional districts, start out far behind and face uncommon struggles.

It’s not so easy to develop an accountability framework that is appropriately fair to the distinct challenges alternative programs face, while also recognizing those that truly give their students a promising second chance. But what is clear is that different metrics are needed to capture evidence of academic achievement and growth in alternative programs, as well as measure how well they prepare Amiah and students like her to become productive citizens.

State officials need to upgrade the quality and accessibility of information on all schools statewide. Along the way, they should take care to accurately assess schools that serve students who have grown accustomed to being overlooked.


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August 4, 2017 MichiganVotes weekly roll call report

The Legislature is on a summer break with no sessions scheduled until Aug. 16. Rather than votes this report contains some interesting or noteworthy bills introduced during the first half of the year.


Various Bills: Restrict opioid painkiller prescription quantities

Bills have been introduced in both the Senate and House to limit the amount of opioid painkillers a physician can prescribe and a pharmacist dispense at one time. They include:

  • Senate Bill 274, prohibit prescribing more than a seven day supply of opioid painkillers at once for acute conditions and 30 days for chronic ones. Passed in the Senate, pending in a House committee.
  • Senate Bill 360, prohibit prescribing more than a seven day supply of opioid painkillers at once to a patient suffering from “acute pain” as defined by the bill. Passed in the Senate, pending in a House committee.
  • House Bill 4601, prohibit prescribing more than a 30-day supply of opioid painkillers at once for “chronic pain,” and a 10-day supply for “acute pain.” Referred to committee, no further action at this time.

Senate Bills 203 and 204: Permit, regulate and tax internet gambling

Introduced by Sen. Mike Kowall, to repeal a state ban on internet gambling, and establish a comprehensive regulatory and licensure regime for providers, along with a 10 percent tax on their gross revenue. Only licensed Detroit or Indian tribe casinos could get a license, which would cost $300,000 plus an annual $100,000 fee. Reported from committee, pending before the full Senate.


Senate Bill 216: Deny state ballot access to US President candidate who keeps tax returns private

Introduced by Sen. Steve Bieda (D), to mandate that as a condition of being placed on the ballot in Michigan candidates for President of the United States must submit their tax returns from the past five years to the Michigan Secretary of State, who must post them online. Referred to committee, no further action at this time.


Senate Bill 237: Require opioid abuse training in schools

Introduced by Sen. Tonya Schuitmaker (R), to require public schools to include instruction on prescription opioid abuse in required health classes. Referred to committee, no further action at this time.


House Bill 4192: Scrap national “Common Core” curriculum and tests

Introduced by Rep. Gary Glenn (R), to cease all planning and actions related to adopting the national “common core” curriculum in Michigan schools and tests, and replace this with an earlier benchmark curriculum. No other system could be adopted without approval by the legislature. Referred to committee, no further action at this time.


House Bill 4349: Mandate schools meet music and art instructor quotas

Introduced by Rep. Erika Geiss (D), to require that public schools provide children in grades K-5 with 90 minutes of music instruction and 90 minutes of art a week, taught by instructors who have particular academic credentials specified in the bill. Also, to impose a quota of one music instructor for every 400 children in a school, and one art instructor for every 650 children. Referred to committee, no further action at this time.


House Bill 4301: Require state agencies post more organization information

Introduced by Rep. Brandt Iden (R), to revise the information that must be included in a 2016 law that requires each state department to provide information to be posted on a state website showing each agency’s organizational staffing chart. The bill would require this to include the name, position title, civil service status and salary for each employee. Exceptions would be allowed for some health and safety-related information. Referred to committee, no further action at this time.


House Bill 4307 and Senate Bill 212: Mandate private employers provide paid sick leave

Introduced by Rep. Stephanie Chang (D) and Sen. Jim Ananich (D), respectively, to mandate that employers must grant employees one hour of paid sick leave for every 30 hours worked, up to 40 hours annually for small businesses, and 72 hours annually for larger employers. Referred to committee, no further action at this time.


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit www.MichiganVotes.org.


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Targeted Business Subsidies vs. Broad Tax Relief

State lawmakers think subsidies improve the economy more

There is a massive turnover of jobs that goes on without politicians having much say or influence.
According to data from the Bureau of Labor Statistics, Michigan added 825,800 jobs in 2016 and lost 779,810 jobs. That is the equivalent of adding and losing roughly one out of every five jobs in just a single year.

State lawmakers approved two new programs to subsidize businesses, promising that they would create jobs. At most, those programs award deals to employers for only handfuls of jobs. The state never got out of the subsidy business. The deals they sign, however, tend to cover only a fraction of the job picture. The Michigan Business Development Program, the state’s primary business expansion grant, offered 84 deals for what state officials expect to create 7,141 jobs.

Many of these are never going to show up. And for the ones that do, it shouldn’t be assumed that the projects would have only happened with state subsidies. And even then, that doesn’t justify the $64 million of taxpayer dollars pledged to these companies. There are economic consequences for business subsidy expenditures.

If all of these jobs actually happen and would not have occurred without state support and if there were no negative economic consequences to taking money from everyone and giving it to select business interests, this “economic development” program would only account for 1.1 percent of the actual job creation in the state.

And that is why the state’s economic development programs simply can’t drive the economy. Even if they could justify their costs, selective deals simply have too limited of a scope to drive a large and dynamic state economy. What can be effective are broad-based improvements to the business climate.

And the state can afford broad-based tax cuts.

The state’s two new programs authorize $1.2 billion in transfers from taxpayers to business owners. One plan would only have a maximum annual cost of $40 million, and the other authorizes its spending over 10 years, so perhaps a $20 million annual cost. That is in addition to the $627.4 million expected to be paid out in old business tax subsidies and the $170.9 million in new subsidies approved in the budget, plus another $25.7 million to administer them. All told, it’s $884 million taken from taxpayers for economic development purposes next year. And that’s not including all of the other preferences, like industrial property tax abatements, that give privileges but do not redistribute money from taxpayers to businesses.

That is enough money to bring the state income tax down from 4.25 percent to 3.9 percent. The question is whether the state would be better off if the people that made the thousands of decisions to employ more or fewer workers in the state were allowed to keep $884 million more of their money, instead of taxing it from them to give to select business interests.

There are some lawmakers that seem to believe that economic development is better served by handing subsidies out to a few companies than letting all their constituents keep it.


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More Proposals to Amend the State Constitution

July 28, 2017 MichiganVotes weekly roll call report

The Legislature is on a summer break with no sessions scheduled until Aug. 16. Rather than votes this report contains some interesting or noteworthy legislative proposals to amend the constitution. To become law these require a two-thirds vote in the House and Senate and approval by voters.

Senate Joint Resolution J: Ban elected official pay hikes until after the next election

Introduced by Sen. Curtis Hertel, Jr. (D), to place before voters in the next general election a constitutional amendment to prohibit elected officials from taking a pay increase until after the next election. Referred to committee, no further action at this time.


Senate Joint Resolution K: Lower minimum age for governor

Introduced by Sen. Ian Conyers (D), to place before voters in the next general election a constitutional amendment to eliminate the current minimum age requirement for governor and lieutenant governor, which is age 30. The bill would leave in place a requirement that a candidate have been a registered voter in the state for at least four years, which implies a minimum age of 22 to be governor. Referred to committee, no further action at this time.


House Joint Resolution Q: Propose a part time legislature

Introduced by Rep. Tom Barrett (R), to place before voters in the next general election a constitutional amendment that would limit annual legislative sessions to 90 days. Since 2001 more than 20 part time legislature proposals have been introduced. This one would establish weekend sessions once a month plus two-week legislative sessions twice a year. Referred to committee, no further action at this time.


House Joint Resolution R: Replace House and Senate with unicameral legislature

Introduced by Rep. Jeff Yaroch (R), to place before voters in the next general election a Constitutional amendment to establish a nonpartisan unicameral legislature (instead of a separate House and Senate) with 110 districts apportioned on the basis of formulas specified in the resolution. Legislators would have four year terms and term limits would be repealed. Voters would no longer see a party designation after legislative candidates’ names on ballots. Referred to committee, no further action at this time.


House Joint Resolution S: Limit referendum on appropriations ban

Introduced by Rep. Robert Wittenberg (D), to place before voters in the next general election a constitutional amendment to revise the current prohibition on citizen referendums challenging bills that contain an appropriation. The measure would establish that the ban only applies to bills that substantially fund one or more state departments, or which are needed to close current state budget shortfalls. A 2001 Supreme Court ruling interpreted the provision to prohibit referendums on any bill containing an appropriation. In several instances since then, the legislature has deliberately added modest appropriations to controversial bills which, without the appropriation, would likely have been challenged by a referendum. Referred to committee, no further action at this time.


House Joint Resolution T: Taxpayer Bill of Rights’ spending cap (TABOR)

Introduced by Rep. Martin Howrylak (R), to place before voters in the next general election a constitutional amendment to cap annual state government spending increases at the rate of inflation plus increases in the state population, with any amount over that returned to taxpayers. Referred to committee, no further action at this time.


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit www.MichiganVotes.org.


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Taking the Pension Task Force to Task

Governments should stop generating new pension debt

Photo taken by Dwight Burdette.

There is a well-established pension funding principle that was missing from the recently published report of the Responsible Retirement Reform for Local Government Task Force. The principle is that governments should pay for the promises they make to employees as they make them. This means that governments should set aside enough money each year to cover the full costs of the pension benefits earned by their employees that year. This prevents pension debt from growing out of control.

Yet this remains the fundamental challenge for financing pension systems. To keep them from becoming a burden on future taxpayers, pension managers need to accurately estimate their costs. This requires assumptions about what is going to happen in the future. If pension managers use overly optimistic assumptions, governments will not set aside enough money to pay for those promises.

The task force’s report focuses on the pension debt that Michigan local governments have already developed. There is a lot of it. The report lists $7.5 billion in pension debt liability and another $10.1 billion represented by current retiree health care policies.

Task force members did not make recommendations for how to pay down these obligations, but there are only a handful of options. Local governments can look for savings in their operations and put that extra money into the retirement system. They can cut retiree health care benefits. They can raise taxes and put that money into their retirement system. Or they can ask for more money from state taxpayers.

Instead, the report recommends that the state set up an entity to monitor local government pension systems and provide recommendations and technical assistance to help local governments. Local governments would report information on their pension systems to a new board, which would identify funding problems, provide oversight and create a plan for local governments to address these issues. Task force members were not unified in whether the new board should have the power to mandate changes to local government finances.

This seems to just be a different application of the state’s current insolvency-prevention policies. Local governments are required to balance their budgets and submit “deficit elimination plans” if they overspend. The state already monitors and assists local governments when possible. And if problems continue, the state has processes in place to get more involved. Though the emphasis is different, a lot of what the task force is proposing is already policy.

There was some good news listed by the report, however. Not every government has a pension problem. Of the 1,800 different general purpose governments, only 519 have pension plans and even fewer offer retiree health care benefits. But nearly all of the larger municipal governments do and nearly all are underfunded, as previous Mackinac Center research has shown.

Despite the criticisms above, there’s nothing wrong with the task force’s recommendations. Local governments are going to face challenges for underfunding their pension systems. But the task force should have reiterated that this is a problem that should never have happened and recommended ways for local governments to stop generating more debt.

Governments must take bold action to contain their ability to generate more pension debt, such as closing pension systems and offering new employees only defined contribution retirement benefits. That’s similar to what the state just did to deal with the massively underfunded school retirement system.


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