Pension, healthcare rollbacks for public workers die in lame duck

LANSING — Michigan teachers and city employees will keep their pension and retiree health care benefits unchanged — for now.

Despite a frenzied push last week by the GOP-led Legislature, leaders in the Senate and House said Tuesday that they won't vote this term on bills to move new teachers into 401(k)-style retirement plans and cap municipal employees' retirement health care benefits.

The decision to let the bills die in lame-duck session that ends next week leaves both issues to be resolved in the new legislative session that starts in January — welcome news to public employee unions, which considered the contentious plans an overreach by state government.

"I'm happy to see that they heard our voice," said Kevin Kazyak, a patrol sergeant for the Waterford Township Police Department, who joined police officers and firefighters from across the state at a rally Tuesday at the state Capitol.

"I don't think anybody disagrees that something needs to be done in the future, but this is a bigger issue. It's not something that can be handled in two weeks. And we're glad to see that the Legislature saw that and is willing to work with us."

Reforming public employee benefits has been a priority of conservative lawmakers and groups such as the West Michigan Policy Forum, which advocated for the issue at an event in September. Municipal leaders also have called for changes to the system because unfunded liabilities are putting stress on local budgets.

The Michigan Municipal League said in a statement that it asked the House to wait on changing retiree health care benefits for city workers until the new term, when it would have more time to work with newly elected representatives, Gov. Rick Snyder and other groups with a stake in the outcome.

Researchers have pegged the tab for unfunded municipal retiree health care obligations at $11 billion. Just 14 percent of local retiree health care plans were funded statewide in 2014; about 78 percent of local pensions are.

The House's local government committee voted 10-1 Tuesday to approve one bill in a 13-bill municipal retirement health care package introduced last week, which would increase required reporting of local government retirement benefits to the Michigan Department of Treasury. Rep. Sheldon Neeley, D-Flint, was the lone opposing vote.

The bill, House Bill 6075, also would require municipalities to publicly disclose their plans to pay unfunded pension and retiree health care obligations if either plan is less than 60 percent funded.

The remaining bills would have limited municipalities to paying 80 percent of annual retiree health care costs starting May 1, and 2 percent of an employee's base pay into a tax-deferred retirement health account for new employees hired after April 30. Overtime pay, sick or vacation leave, bonuses or other compensation "paid for the sole purpose of increasing final average compensation" would have been excluded from determining an employee's base pay.

The legislation would have applied only to municipalities whose retiree health care costs are less than 80 percent funded, or municipalities that fall below the 80 percent threshold for two straight years.

"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," House Speaker Kevin Cotter said in a statement. "(Other post-employment benefits) debt did not get much attention before this bill package, but the effects of leaving it to grow unchecked will be felt statewide. If we do nothing, numerous cities, townships, villages and counties across the state will go bankrupt.

"Unfortunately, our work on this issue showed just how little information on municipal finances is available and how hard it is to get a proper grasp of the details of the problem. Our members need more and better information to do this right."

Additionally, a spokeswoman for Senate Majority Leader Arlan Meekhof confirmed there are no plans to vote this year on bills to move newly hired teachers into a defined-contribution, 401(k)-style retirement plan. They cleared a Senate committee last week by one vote.

Testimony in committee indicated there could be billions of dollars in extra costs to make the switch out of a hybrid defined-benefit, defined-contribution plan that new teachers are offered now. The pension component of the hybrid plan is fully funded, the state said.

The proposals have drawn considerable fire from public employee unions, including police officers and firefighters, who liken this year's push to the right-to-work battle in 2012. Those bills eliminated the ability of unions to collect dues as a condition of employment.

Rep. Lee Chatfield, R-Levering, and chairman of the House's local government committee, said in a statement that the remaining bills needed more work than could be done in lame-duck session.

Transparency measures, if approved, would create the framework for future action, he said.

"I applaud (Cotter) for beginning a difficult conversation, because ensuring our police and fire are taken care of with sound financial planning is extremely important," Chatfield said. "The committee is dedicated to finding a solution, but I didn't feel there was the proper time or information available to move forward."