Benefit calculations are an integral part of understanding how public pension fund dollars are disbursed to retirees. Starting in April of this year, details of those calculations used by Michigan’s public employee retirement systems will be exempt from the state’s Freedom of Information Act.
Except as otherwise provided in this subsection, information regarding the calculation of actual or estimated retirement benefits for members of the system is exempt from disclosure by the system or the political subdivision sponsoring the system pursuant to section 13(1)(d) of the freedom of information act, 1976 PA 442, MCL 15.243.
Actual payments to retirees have been considered public record since at least 2005 when the state Court of Appeals ruled that pension amounts “do not constitute personal information.” That may still be true, but this new law means that the calculations behind payments are not public, and thus deals a severe blow to pension transparency. Knowledge of calculation formulas is precisely what can shed light on the causes of exorbitant retiree payouts.
Benefit calculations typically include three figures: years of service, a “pension factor,” and final average compensation. The first two are relatively easy to discern on their own, without records requests. The third figure, final average compensation, is a different story. As one author pointed out, final average compensation stands out as the most important and illusive of the bunch because it includes much more than an easily discernible employee salary. In his case of 24 Lansing, Michigan police officers, for example, final average compensation exceeded salary by an average of over $11,000.
Michigan’s website currently lists gross wages (including overtime, premium time, etc.), annual leave, compensatory time, longevity pay, performance pay, voluntary plan A hours, banked leave time, and furlough hours as components of “final average compensation.” Retirees and their employers alike often try to boost this total to secure greater pension payments upon retirement.
This seems quite likely given the Detroit News reported that while two-thirds of Michigan state retirees earn less than $20,000, 49 collect yearly payments in excess of $100,000. This information alone was public record and was retrieved through a Freedom of Information Act request. When the new law takes effect, just how this was actually occurred will be kept out of the public’s view.
Transparency in government can be meaningless if it exists for its own sake. It becomes indispensably valuable when citizens use the knowledge it makes possible to change the way governments do business. Specifically, exempting details of benefit calculations from Freedom of Information Act requirements makes this effort undeniably more difficult and makes exceedingly high pension payouts from already underfunded systems more likely.