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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
Date: June 16, 2008

The Legislature is continuing its work on the 2008-2009 budget and is still hoping to conclude its work before July. Most, if not all, of the budget bills are ending up in conference committees where members of both chambers will sort out the final tally for each department. With only a handful of session days left to complete their work, there will likely be some late nights toward the end of June.

The numbers from the latest Revenue Estimating Conference were not good, and that has led to some conflict between the House, Senate and Governor. The Republican-controlled Senate is pushing to make deeper spending cuts, while the Democratic House and Governor Granholm are fighting to preserve various programs. This ideological difference has already come to a head in the Capital Outlay budget, where the Senate won the first round by holding off on millions of dollars that would have gone to building projects at a number of state universities and community colleges.

115 Trust Bill-Possible Committee Action

On June 26, the House Committee on Retirement Health Reforms is likely to take up legislation designed to address problems created by the new General Accounting Standards Board (affectionately known as "GASB") regulations.The legislation will create a vehicle to restore prefunding for the state's retiree health plans, including MPSERFS. HB 5913 (Rep. Richard Hammel, D-Flushing) has been re-drafted, and we are in the process of reviewing the new version. It appears that Health Retirement Accounts (HRA's) have been removed from the bills. AFT Michigan and other unions asked for this change because of our concerns about the potential for HRA's to become mandatory.. We also proposed language to create more of a "lock box" for money that is meant to be reserved for future retirees' health care, and our first reading of the new draft shows that the bill is improved in that regard as well..

Bill to Extend Ability of Public School Retirees to Return to Work Passes House

Representative Tim Melton (D-Auburn Hills) sponsored legislation that, as introduced, would have extended the maximum time a public school retiree could return to work at a school district in an emergency situation from 6 to 10 years. As reported out of committee, the bill expanded the "return to work" provision by 8 years rather than 10, addressed some of our concerns regarding districts' abuse of the provision, and removed the 2011 sunset provision in the current law. House Bill 4593 passed the House on June 12 with only one "nay" vote.

Concerns about school districts abusing this provision led to changes in the bill regarding payment for health care. The current option is attractive to some school districts because the retirement system picks up the health care costs for the returning employee. Thus, districts not using the provision are "subsidizing" its use by others; retirees themselves have had additional cost sharing because of the rising costs of retiree health care, some fraction of which may be due to over-utilization of this provision. To address these problems, the bill was amended to require school districts to pay 50% of the retired employee's health care costs after three years, and 100% of the costs after four years. This should significantly reduce the likelihood that a school district will use this option merely to avoid paying for health care. The bill now goes to the State Senate for its consideration.

Divestiture Legislation

HB 4854 (Rep. Alma Wheeler Smith, D-Ypsilanti) and HB 4903 (Rep. Marty Knollenberg (R-Troy) have been reported out of senate committee and are on the Senate floor. These bills, which affect Sudanese and Iranian divestiture respectively, have been tie-barred to the Senate bill package, SB 846-856 and SJR "J", which deal with divestiture from all state sponsors of terrorism. The senate bills have all passed the Senate and are in the House Committee on Government Operations.

Pension Forfeiture Legislation

HJR VV and HB 5339 (Rep. Kim Meltzer, R-Clinton Twp.), both address pension forfeiture and are in response to an incident involving a school administrator in Macomb County. The resolution would make pensions forfeited under the forfeiture act not subject to the "no diminishment or impairment" clause of the state's constitution. The bill would make pension forfeiture mandatory rather than subject to judicial discretion. We are concerned that both are an overreaction to a local incident.

Both the resolution and the bill have been referred to the House Committee on Governmental Operations, chaired by Rep. Lisa Wojno (D-Warren). We have had a brief discussion with Rep. Wojno as well as with Rep. Meltzer's staff regarding our concerns about changes to pension forfeiture. On Tuesday, together with the AFL-CIO lobbyist, we will be meeting with Rep. Wojno to pursue this discussion further.