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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
Date: July 3, 2008

Update on School Employee Pension Legislation

Prefunding Bill Reported Out

On June 26, the House Committee on Retiree Health Reforms reported out HB 5913, with the support of AFT Michigan. This legislation, sponsored by Rep. Richard Hammel (D-Flushing), would create a vehicle - a 115 Trust - for the prefunding of retiree health care various state-operated pension systems, including the Michigan Public School Employees Retirement System. Prefunding retiree health care is beneficial because the return on investments can help pay for rising health care costs. Therefore, prefunding will help offset having cost increases passed on to retirees in the form of increases in co-payments and deductibles.

We are pleased to say that the version of the bill as reported out took care of the issues raised by AFT Michigan, the Michigan State AFL-CIO, and other public sector unions. The legislation no longer includes Health Retirement Accounts, which we believed should be the topic of another bill. It also more strongly protected prefunding money from being siphoned off to meet current budget needs. Finally, we are delighted that the legislation contains language that would make school retiree health benefits a contractual right and specifically stated that once a member of the system has retired, his or her retiree health benefits cannot be diminished.

This bill was reported to the House floor but is not expected to be taken up until the fall.

Divestiture Package Sent to Governor

Major components of a divestiture legislation package introduced last year have been passed by the state legislature and sent to the governor for her consideration. SB 846, sponsored by Sen. Cameron Brown (R-Fawn River Township), calls for the phased in divestment of public funds invested in nations that sponsor terror, a list that is developed by the US State Department and has recently included five countries: the Sudan, Iran, Syria, North Korea, and Cuba - although it appears that North Korea is being removed from the listing. The public pension funds that are affected are: the Legislative Retirement System, the State Employees' Retirement System, the Public School Employees' Retirement System, the State Police Retirement System, and Judges' Retirement System.

SB 846 is tie-barred with HB 4854, sponsored by Rep. Alma Wheeler Smith (D-Salem Township), and HB 4903, sponsored by Rep. Marty Knollenberg (R-Troy). Because they are tie-barred, one bill cannot be signed into law unless the others are as well. HB 4854 divests all state funds in Sudanese businesses or investments while HB 4903 prohibits investing retirement assets in a corporation doing business with Iran. HB 4903 requires the Michigan Legislative Retirement System Board of Trustees to make a scrutinized companies list available to the fiduciaries of other public retirement systems. The Sudan is singled out because of the ongoing genocide towards the people of Darfur, totaling in over 300,000 deaths. Iran is singled out for being a repressive regime involved in the creation of nuclear weapons, despite the opposition it faces from many other countries.

Other bills in the package, SB 848-50, 853, and 856 deal with various other state funds other than retirement funds, including the Veterans' Trust Fund, the Natural Resource and Environmental Protection Act funds, 21st Century Jobs Funds, the Children's Trust Fund, and the Michigan Education Trust.

All the bills from the package that passed were given immediate effect, which would commence upon the signature of Governor Granholm. HB 5998, sponsored by Rep. Mary Valentine (D-Muskegon) was to be part of the package in lieu of SB 847; however, that bill has not yet passed the Senate.

Although a number of states have enacted divestiture laws, this would be one of the most comprehensive divestiture packages dealing with terrorism passed by any state.

Prepared by Ellen Hoekstra, Capitol Services, Inc.