Retiree pensions in Detroit were underfunded. Politicians fretted about the city's inability to pay the obligations and state officials debated what to do about the problem.

Sound familiar?

That was 1961 and retiree pensions were underfunded to the tune of $1.2 billion, when adjusted for inflation. Politicians foresaw a government that promised state workers retirement benefits it couldn't afford so they attempted to protect those pensions in a new constitution — the fourth in the history of Michigan. It was completed in 1962 and approved by voters a year later.

Today, Detroit's Emergency Manager Kevyn Orr projects the city's pension liability at $3.5 billion and wants to cut the pension debt. In two recent editorials, the Detroit Free Press said the pensions should be untouched during the city's bankruptcy.

"The City of Detroit made promises to its workers, promises it can no longer keep. And in 1963, the residents of Michigan chose to approve a constitution that protected pensions," a Dec. 5 editorial read.

In an Aug. 1 editorial, the Free Press stated Michigan has, "an ironclad constitutional protection …" on pensions.

But the comments from the convention delegates more than 50 years ago show two components of constitutional protection for government pensions had to be in place.

In the words of one delegate:

… one, that the retirement that was promised any employee which he has lived long enough to earn shall not be impaired or diminished; and two, that from now on all retirement funds that are promised by employers shall be funded properly.

In other words, they should put enough money in there so when they retire the money is there. And there was a very specific purpose for this. … I wanted employers, legislative bodies and city councils to be very aware of what they were spending when they gave a person, a public employee, a retirement program. In other words, how much did it cost per year? … But from now on any governmental body cannot avoid paying for a retirement fund that they promise an employee. They've got to make those payments annually, on time.

Eric Lupher, director of local affairs for the public affairs research group Citizens Research Council of Michigan, pointed out in a recent column that the plan was to have government fund whatever benefits they promised.

"The committee deliberately did not require public employers to fully fund benefits accrued during prior years of service as they anticipated it would be an overwhelming financial burden," Lupher wrote. "However, they wanted to ensure that going forward, the financial burdens for funding pension benefits were not passed onto future generations."

Patrick Wright, senior legal analyst at the Mackinac Center for Public Policy, said public pensions are dangerous because they allow politicians to promise benefits now and have their successors pay later.

"The constitutional provision was meant to have the proper money set aside each and every year," Wright said.

Stephen Henderson, editorial page editor at the Detroit Free Press, didn’t respond to a request for comment.

When it comes to financial burdens, both Republicans and Democrats often claim to "fight for the little guy."

The former may campaign against tax hikes while the latter may vote for "progressive" taxes on top earners, but don't be fooled: when it comes to occupational licensing, both sides consistently vote to burden people with often unnecessary fees and requirements. 

Licensing is a process by which the state makes it illegal to do a certain job unless one completes a series of mandatory classes, training or exams (or all three), and pays an assortment of fees. The rules disproportionally affect low- and middle-income workers who may not have the knowledge or expertise to navigate through this complicated system of rules and regulations. Licensure is often applied to jobs that typically do not require a college degree.

The state of Michigan requires licensing for hundreds of occupations, from A (auctioneer) to W (Wrecker service). Once local licensing is taken into account, the state increases the cost of earning a living for more than 1,000 different occupations.

These government rules are growing more prevalent. The national percent of occupations now requiring a license has increased from approximately 5 percent in 1950 to about 30 percent today, according to Morris Kleiner of the University of Minnesota. 

In Michigan, the state mandates 60 hours of classes and training and several hundred dollars in fees to legally work as a painter or landscape architect and to do other construction work, such as installing a storm window, putting up rain gutters and laying down tile.

State barbers have among the heaviest licensing requirements in the nation. They must endure 2,000 hours of training at one of the seven private barber colleges in the state. Lawyers only need 1,200. Few other states have mandates that weighty. The state of Alabama had no licensing at all until this year, and there is no evidence that getting a haircut in the Heart of Dixie is any less safe than getting one in the Great Lake State. Unsurprisingly, the colleges training Michigan barbers fight tirelessly to keep the regulations in place because it amounts to a guaranteed revenue stream for them.

State and local governmental units also want people to pay a fee to clean carpets, run card games and raffles, operate vending machines or compete as a horse jockey.

The state and local licensing groups often maintain that these requirements are for “safety,” but almost all of the areas for which the state requires licenses are not what most people would reasonably consider dangerous.

The Michigan House is considering dozens of bills that would repeal certain requirements, but the fight will be difficult. Licensing is a textbook example of the phenomenon economists call "concentrated benefits and diffused costs." Those with the most to gain (like the private barber colleges) devote more resources to lobby to preserve their advantage than those who are damaged (the service providers and consumers who are both forced to pay more to trade in the marketplace) devote to eliminating the regulations. 

An option for the Legislature that would put Michigan licensing standards on the correct path is House Bill 4641, introduced by Rep. Tom McMillin, R-Rochester Hills. The bill prohibits government units from imposing occupational licensure without proof of valid public health and safety concerns, and when licensing is beneficial, requires the least restrictive method of obtaining it. It also allows workers to sue the state if a regulation excessively burdens their right to earn a living; if a court agreed, the mandate would be thrown out.

With that in mind, many of Michigan's licensing laws should be thrown out, which would allow more residents to become gainfully employed and consumers to benefit from the lower prices brought by competition.

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Jarrett Skorup is research associate for Michigan Capitol Confidential, a news service provided by the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.