Numerous media reports are misinterpreting the way Detroit's retirement system will operate going forward.

According to the Associated Press, the bills eliminate, "a provision that would have required new hires to have 401(k)-only retirement plans once collective bargaining contracts expire. Instead, the city and unions could negotiate for pension or hybrid plans as long as the city does not contribute more than 7 percent of an employee's salary to retirement."

Stories in the Detroit Free Press and MLive had similar descriptions of the legislation, House Bill 5568.

However, the bill does not limit the city's contributions nor does it address the ability for the city to rack up more unfunded liabilities — an essential reason that Detroit is in bankruptcy court to begin with.

First, the bill only specifies that it would have an option of providing benefits to employees hired after July 1, 2023.

Moreover, it's not clear that the city's contributions would actually be limited to 7 percent of an employee's salary.

The bill states: "The city may offer retirement plans so long as the city does not contribute more than 7 percent of the employee's base pay to an appropriate retirement account."

To determine a city's obligation to fund pension benefits, payments are split into different means. One is the normal cost, that is, the cost it takes to prefund benefits that employees earn in a year. The other is the cost to catch up on any unfunded liabilities, the amortization payment.

The normal costs are calculated for the entire employment class and put in the retirement system so they're not technically made to "an appropriate retirement account." Actuaries do not calculate the value of the pensions earned by each employee individually, but rather as a group. However, this could be roughly translatable to "an appropriate retirement account," and the normal costs could be limited to 7 percent of payroll.

But this would not apparently apply to the amortization payment, which is paid to the system in general. If the pension funds develop an unfunded liability, the payments to amortize this liability would not be limited to 7 percent.

As I noted in a previous blog post, Detroit Emergency Manager Kevyn Orr has suggested that Detroit's lenders in effect deserve to lose their shirts because they should have known the city was "openly and notoriously" driving itself into bankruptcy.

Gov. Rick Snyder took a similar shot at lenders last year on the national "Face the Nation" TV program:

And realistically if you step back, if you were lending to the city of Detroit in the last few years, didn't you understand there were major issues and problems? And look at the yields they were paying compared to other bonds. They were getting a premium.

Neither man seems to recognize that the same criticism could be leveled against city and state officials, who for years knew or should have known that Detroit was rushing toward a fiscal cliff. Not only did they ignore countless warnings, but state officials actively played enabler to Motown's fiscal malpractice.

Specifically, the borrowing Gov. Snyder criticized would not have occurred if not for a 2010 vote by the Legislature to grant Detroit special permission to go $250 million deeper in debt just to pay its routine day-to-day operating expenses. Many of the politicians who approved that "second-mortgage-to-pay-the-light-bill" debt are still in office today — debating a Detroit bailout to fix a problem they helped create!

This is one of many good reasons for the Legislature to say "NO!" to a $195 million Detroit bailout, which shifts to taxpayers the burden of those same politicians' past folly. Another is that while it may seem like good fun now for them to rhetorically slam and financially inflict disproportionate losses on past purchasers of Detroit bonds, a likely consequence is that other Michigan municipalities will be forced to pay higher rates to fund legitimate infrastructure needs.

A bailout is unfair to Michigan taxpayers, will encourage other cities to seek bailouts (Flint is also facing bankruptcy), and imprudently diverts money that could be better used elsewhere in the state — like filling nearly 10 million potholes. The fact that the same amount the Legislature wants to give to Detroit could be raised by selling just one painting from the city's art museum adds insult to taxpayer injury.

Lansing politicians neither have the economic nor moral high ground in the Detroit bailout debate. They were party to its fiscal malpractice and now want to drag Michigan taxpayers into the mire to cover up their own failed oversight. They should not.