By Paul Egan and Kathleen Gray
Detroit Free Press
LANSING, Mich. — Facing a strong backlash from police and firefighters, Michigan House Republican lawmakers backed off today on plans to cut retiree health care benefits for local government workers during the lame duck session.
And Senate Republicans, facing a vigorous backlash from the administration of Gov. Rick Snyder, among others, retreated — again for the time being — on their plan to close the Michigan Public School Employees Retirement System (MPSERS) to new members and force all new teachers into a 401(k)-style defined contribution retirement plan.
GOP House leadership announced the change in plans on retiree health care as police officers and firefighters from across the state demonstrated outside the Capitol during a nearby meeting of the House Local Government Committee.
Law enforcement bagpipers played on the steps of the Capitol and protesters lined the sidewalk legislators walk from the House Office Building to the Capitol.
“Members needed more information,” and data for the size of unfunded retiree health care liabilities in Michigan local governments not nearly as good as reporting is for unfunded pension liabilities, said Gideon D’Assandro, a spokesman for House Speaker Kevin Cotter, R-Mt. Pleasant.
Cotter issued a statement that said “this is an important reform that needs attention soon, and the bill sponsors and committee members who shined a light on this situation have taken an important first step.”
Cotter said: “If we do nothing, numerous cities, townships, villages, and counties across the state will go bankrupt” and “that will threaten our public safety, ruin local economies and possibly cause every retirement benefit our brave first responders currently have to be lost forever in bankruptcy court.”
Instead of a 13-bill package, Republicans hope to pass just one bill, House Bill 6075, which would improve local government reporting on the issue, D’Assandro said. Then, armed with better data, the Legislature can take up the issue in the next session, he said.
Opponents of the legislation were pleased.
“The issue of liabilities needs to be dealt with, but in the proper way, and that was not in lame duck,” said Mark Docherty, president of Michigan Professional Fire Fighters Union.
Chris Hackbarth, director of state and federal Affairs for the Michigan Municipal League, said his group feels the issue must be addressed, but due to its complexity, “requested the House delay action on this proposal at this time and allow the opportunity to work with Gov. Rick Snyder, the incoming Legislature, and all of the relevant interest groups in the next term.“
The package of local government bills would:
Eliminate retiree health care benefits for local government employees hired on or after May 1, 2017, and allow local governments to replace the benefit with a contribution into a health savings account, capped at 2% of an employee’s pay.
Cap a local government’s contribution for retirement health benefits for existing employees and retirees at 80% of the annual benefit cost, provided the retirement system’s liability for retiree health benefits is less than 80% funded at the time of the legislation, or later falls below 80%.
Make retiree health care a prohibited subject of bargaining under the Public Employment Relations Act.
Protect post-retirement health benefits that are contractually vested — meaning existing collective bargaining agreements that expressly promise specific benefits for a specific period of time.
On MPSERS, new teachers since 2010 have joined a hybrid system that combines a smaller defined benefit pension plan with a 401(k)-style defined contribution plan.
Hundreds of police officers and firefighters are at the Capitol today to protest changes to retiree benefits pic.twitter.com/4bi6eKaR2Z
— Lansing StateJournal (@LSJNews) December 6, 2016
Senate Republican leaders wanted to kill the hybrid plan in favor of a pure defined contribution plan because it would prevent future unfunded liabilities.
But officials from Snyder’s Office of Retirement Services and the Senate Fiscal Agency said transition costs associated with such a move would cost between $1.6 billion and $4.7 billion over five years.
Senate Majority Floor Leader Mike Kowall, R-White Lake Township, said the legislation, which narrowly cleared a Senate committee, won’t be taken up by the full Senate during lame duck.
The Michigan Education Association praised the move, saying such a move shouldn’t be rushed.
“Tabling this discussion rather than ramming this legislation through is the right decision,” said MEA President Steven Cook in a statement. “Education leaders and fiscal experts agree that dismantling the school employee retirement system would have been bad for school employees, parents, kids and taxpayers.”
Copyright 2016 the Detroit Free Press