Governor Granholm Called to Underfund Pensions 6 Years Before Company Bankruptcy

There is no natural constituency for properly funding pensions

Jennifer Granholm. Photo from

There is a lot of pressure to underfund pensions, and the promises that guarantee them, whether moral or constitutional, are only as strong as the money that is set aside to pay for them.

In researching the history of some state business subsidies, I came across some talking points from a 2003 speech by former Gov. Jennifer Granholm at a Delphi plant (now Nexteer) in Saginaw. She made this point:

Because many of our manufacturers provide their employees with defined benefit pension plans, they are required to set aside unrealistically high reserves to meet future obligations. This siphons off company reserves that could better be used to invest in new technologies, new plants, and advanced training for workers.

Within six years, the company would be in bankruptcy, the employee pension plan was terminated and taken over by the Pension Benefit Guaranty Corporation. That government agency, for its part, also has an underfunding problem. And because not enough money was set aside for Delphi retirees, pensioners took major cuts to their benefits.

The governor’s comments— to those who understood their context — criticized federal rules governing pensions and called for weakening their funding requirements. But they did not change federal policy. Perhaps she made them at the request of company executives, and maybe union leadership even acquiesced on the policy. Yet the plight of Delphi retirees indicates that there are few people that mean to keep pensions properly funded.

Related Articles:

Unions Fight their Members’ Interests on Pensions

The Lose-Lose Situation in Pension Funding

Unions for Underfunding

$1 Billion of Tax Money Thrown Into a Growing Deficit

Illinois Takes Pension Advice From ‘The Simpsons’