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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
September 17, 2010

MPSERS Revised Contribution Rates FY2011 [.pdf] 112k

State Employees Retirement Bill: Part of the Budget "Fix"?

One politically shaky part of the current leadership deal to put together a budget for the fiscal year that starts in October is an early retirement incentive for state employees, somewhat similar to what was enacted for school employees. Although it is still being drafted, we understand that the latest version of SB 1226 (Sen. Mark Jansen, R-Gaines Twp.) will permit state employees already eligible to retire to receive a 1.6 % multiplier if they retire within the early retirement window. Other employees with either 30 years of service or a combined age and service of 80 would receive an enhanced multiplier of 1.55%. The proposal phases in the 3% payment into retiree health care over a five year period, with the first year's payment being 1% and subsequent years a half a percent more per year. Because of this phase-in, the Republican Vice-chair of Appropriations, Rep. Chuck Moss has said that Speaker Dillon should not count on Republican votes--a problem for the Speaker who probably needs forty or more Republican votes.

Even with the phase-in, the bill is projected to save the state $60 million in the first year with a cumulative savings of $250 to 300 million over ten years--mostly coming from the payments made by state employees, of course. As was true for the school employees' bill, the proposed state employee legislation does not include any guarantee that current or future retirees will actually receive health care, let alone at the level currently delivered. HB 6426 (Rep. Mark Meadows, D-East Lansing) would guarantee retiree health care for all public sector retirees--including school retirees--but there is no leadership agreement to take up the Meadows bill.

State employee unions are as opposed to this bill as AFT Michigan and other school unions were to what was enacted for school employees. Their opposition comes from the fact that having taken concessions at the bargaining table, they are now being told to pay 3% more for future retiree health care--with no commitment that it will be delivered.

Other Retirement Legislation

Since the Governor signed SB 1227--the school employee "retirement incentive" bill- into law regarding public school employees' retirement, there has been little action on legislation specifically affecting school retirees. The legislation that would essentially put all public sector employees and retirees into one set of retiree health plans, HB 5345 (Rep. Andy Dillon, D- Redford Twp.), remains in committee. A new version of the bill was unveiled, but the new version still includes public sector retirees, despite the recommendations of the retirement subcommittee to remove retirees from the bill; Rep. Harold Haugh (D-Roseville) had chaired the retirement subcommittee that suggested pulling retiree health plans from the bill.

Another bill, HB 5756 (Rep. Steve Lindberg, D-Marquette), amends the Michigan Employment Security Act to prohibit unemployment benefits from being reduced for receipt of a pension, annuity or other similar payment. This bill would bring Michigan's unemployment insurance system into compliance with Federal law. This legislation has passed the House and is on second reading in the Senate.

Constitutional Convention 2011?

Most state government insiders believe that Michigan voters will shoot down a 2010 ballot question that would call for a 2011 constitutional convention. Michigan's Constitution requires that voters be given a chance every 16 years to rewrite the state's governing document. If it is approved, 148 delegates representing each state house and senate district would be elected to review and propose changes to the Constitution.

The proposed constitutional convention will be one of two proposals on the ballot for 2010. The second is a proposal to amend the Michigan's Constitution to prohibit certain felons from holding elective office and specified types of public employment positions. The Citizens Research Council (CRC) has been publishing a series of articles analyzing the proposed con-con www.crcmich.org.

For 47 years, Michigan state government has operated under a constitutional framework that centralizes executive power in a single office and provides for a strong governor. Unfortunately, relatively few voters know that if the Michigan Constitution were opened up, it becomes a blank sheet of paper in the sense that nothing would have to be carried over from the current constitution. This should be of particular concern to retired school employees because of the constitutional protections in Article IX, Section 24:

The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

Financial benefits, annual funding

Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for funding unfunded accrued liabilities.

If there were a constitutional convention, the provisions quoted above, which protect public pensions from being reduced and require their prefunding, could be eliminated or greatly reduced.

The risk of losing these constitutional protections is another reason for school employees and retirees to vote NO on Con Con.

By Ellen Hoekstra
Capitol Services, Inc.