In a private retirement system, such as a 401(k) or defined contribution plan, retirees only collect money they and their employers paid into the fund and the investment gains on it. Public pensions are different in one crucial aspect: Retirees can collect money that they did not pay into the fund.

If governments promise benefits they have not reserved enough money to pay for, then the government has an unfunded liability. This is happening all across Michigan, and is leaving taxpayers and retirees responsible to pay for the local government’s mess.

Michigan Capitol Confidential reviewed all of the county pensions in Michigan and found some counties acting wisely, while others continue to build debt.

Overall, Michigan’s 83 counties owe $2.55 billion more to retirees than they have saved to pay in benefits. Combined, these counties are 76 percent funded.

Ten counties have stopped enrollment in defined benefit plans and now offer defined contribution plans to new employees In these closed plans, they have set aside 94 percent of the money required to pay retirees

Two counties in Michigan are funded over 100 percent: Bay and Kalamazoo. Both of these counties have defined benefit pension plans.

In 2015, county records showed  $390 million given to county pensions across the state.

Taxpayers in Wayne, the largest county in Michigan, paid the most: $89 million toward its county’s $842 million unfunded liability. The county has 2,321 active employees enrolled in its pension plan. So, taxpayers contributed more than $38,000 for each employee.

This money, however, is not paying for the pensions being earned by current employees. This is because most of the money is going to pay down the system’s unfunded liabilities.

Despite contributing more money than any other county, Wayne’s pension is 49 percent funded, which is the lowest percentage in Michigan.

The next two largest counties, Oakland and Macomb, look much better. Both of these counties have closed their defined benefit plan and now enroll new employees in a defined contribution plan, which does not have the risk of underfunding.

Oakland has an unfunded liability of $13 million and is funded at 98 percent. Macomb’s unfunded liability is $38 million, and the county has a funded percentage of 96 percent.

Genesee, the fifth largest county, plans to close its defined benefit plan to new hires on Nov. 20, 2017. Genesee has only 69 percent of the money it needs to pay retirees. The county comes up $109 million short of its obligations.

Robert Daddow, Oakland’s deputy county executive, talked about the county’s success and the choice to close its defined benefit plan to new hires in 1994.

“We realized that long-term defined benefit plans were going to be a problem. At that time and until the market declined in 2008, we were in good shape,” Daddow said. “But then we took a hit. We thought long-term defined benefit wasn’t where we wanted to be.”

Oakland’s civil service pension was 160 percent funded in 1994, but Daddow said the county wanted to act proactively by closing it.

Daddow laid out what it takes to have a fully funded pension system.

“To avoid an unfunded liability, the only things you can do are either fund the dollar amount that the actuary recommends, or alternatively you can cut benefits,” Daddow said.

Due to the Michigan Constitution, cutting pension benefits is nearly impossible. So the only option is to pay the required amount.

Daddow said closing defined benefit plans and enrolling new hires in a defined contribution plan will cut down on the required payments long-term, while still providing solid benefits to retirees.

Oakland County has saved $115 million since 1994 by using a 401(k) instead of its defined-benefit pension plan.

Michigan’s counties have promised to provide retirement for over 63,000 employees but right now not enough money is being saved for them. Local governments need to stop offering new pension benefits but still fulfill the promises made to those already in the system.

The Ann Arbor City Council last week voted for an ordinance that will ban the sale of tobacco products to people under 21, making it the first city in Michigan to raise the legal purchasing age from 18.

The Council voted 9-2 on Aug. 4 for an ordinance sponsored by Council Member Julie Grand, a Democrat representing the city’s 3rd Ward.

Ann Arbor officials were explicit about their lack of concern with whether the ordinance conflicts with state law, and that they hope the rest of the state follows the city’s lead.

"The tobacco lobby has inflicted enough misery on this country and I'm happy to do anything we can to play a leadership role on this effort in Michigan,” Kirk Westphal, a Democratic council member from the 2nd Ward said, according to The Ann Arbor News.

"It's particularly important to me," said Council Member Chip Smith, a Democrat from the 5th Ward. "But really what compels me to support this is the fact that Ann Arbor is a leader in things, and this is exactly the type of thing we should be leading on, and I'm very happy to support this.”

In addition to the apparent conflict with a state law preempting local regulations, critics of the ordinance are concerned that its effect would be to send people under 21 to neighboring cities like Ypsilanti or Canton to buy tobacco products. Jack Eaton, a Democrat from the 4th Ward, and Jane Lumm, an independent from the 2nd Ward, voted against the ordinance. According to The Ann Arbor News, they cited Michigan's Tobacco Products Tax Act of 1993 as the cause for their concern.

The act says municipalities “shall not impose any new requirement or prohibition pertaining to the sale or licensure of tobacco products for distribution purposes.”

Stephen Postema, the city attorney for Ann Arbor, said the Home Rule Cities Act “gives broad powers to the cities to govern themselves.” Postema wouldn’t expand on any specific legislation.

Democratic Council member Sumi Kailasapathy, from the 1st Ward, said if the ordinance is illegal, it’s worth fighting for in court. Council Member Sabra Briere, a Democrat also from the 1st Ward, argued that the state law is outdated, the Ann Arbor News reported.

Tobacco 21, an advocacy organization founded by Rob Crane, a professor at The Ohio State University, inspired Ann Arbor’s ordinance. The organization claims that more than 180 cities in 12 states have Tobacco 21-inspired laws. California and Hawaii are the only states where the tobacco purchasing age is 21 statewide.

Julian Morris, the vice president of research for the Reason Foundation, studied a similar proposal in Chicago, which was later enacted. He said Ann Arbor will likely see an increase in cigarettes sold on the black market.

“As I noted in relation to the proposed ordinance in Chicago that had a similar increase in the legal purchasing age, the main consequence is likely to be an increase in the supply of cigarettes through criminal networks,” he said. Unlike Ann Arbor, Chicago added a tax increase on tobacco products.

“Raising the age at which people can legally obtain tobacco to 21 doesn’t help young adults make healthy choices at all; it simply remove choices,” Morris wrote in February. “It disempowers and infantilizes those young adults who comply and it criminalizes those who disobey.”

Kai Petainen, an Ann Arbor resident who attended the city council meeting, said he recently went to a funeral of a 23-year-old who died from a drug overdose. That friend used tobacco as a gateway drug, he said.

“It's a funeral of a person who died at only 23 and it was from an overdose. That person began using tobacco at a young age, and eventually they were using other drugs as well,” he said. “Tobacco use can lead to other drugs and it can and does destroy lives.”

“Although this person lost their life, I hope that by increasing the age to 21, that it makes it harder for others to get tobacco at a young age and it saves some lives,” Petainen added. “Yes, kids will be able to get tobacco from areas outside of Ann Arbor, but my hope is that other communities will adopt this policy as well.”

Tobacco shops in Ann Arbor have said the ordinance will drive customers out of the city.

Chris Rosenthal, who owns Tobacco Rose Cigars, said that while people ages 18 to 21 don’t generally buy premium cigars from his shop, cigar sales should not be regulated the same way as other tobacco products since cigars are a different method of tobacco use.

“The nature of premium cigars are not as addictive as other forms of tobacco because the method of using it is different,” he said. “There’s no inhaling, it’s long-leaf, no chemicals added, no-additives tobacco. So very few get addicted just from smoking a cigar after graduating from high school.”

“That will hurt in the summer time,” Rosenthal said. Those under age 21 who do buy cigars from his shop buy them to celebrate high school graduation, he said.

“I oppose it more on principle than on business,” he added, noting some members of city council went on the record acknowledging that the ordinance violates state law, yet still went along with the ban. “It doesn’t make a whole lot of sense the way it’s written, to begin with. The fact that I’m not allowed to sell it to them but they’re allowed to try to purchase it, they’re allowed to use it within the city limits. They’re allowed to drive a mile and a half down the street from my store to Ypsilanti and purchase their cigars, come back to my store because I have a legal smoking lounge and smoke it.”

“Where does that ever make sense? I don’t know,” he said. Rosenthal also said regional law firms have reached out to him, but he hasn’t decided yet and doesn’t want to cause the city thousands of dollars in legal fees.

The ordinance does not go into effect until January 1, 2017. People under the age of 21 will not be penalized for possession or use of tobacco; rather, retailers or vendors will face penalties.