Thursday, July 19, 2012

Retirement Reform FAILS to get needed votes!


The Senate today failed to get the votes needed to pass a version of school employee retirement reform the House and Governor had wanted to address $45 billion in unfunded liability to the system, pushing into August the last remaining piece to the state budget.

The 16-22 defeat on SB 1040 stalls, for at least another month, $330 million in savings Gov. Rick SNYDER and lawmakers had planned to save in the upcoming Fiscal Year (FY) 2013 budget for schools.

Gov. Rick SNYDER and House Republican leadership don't want to move to a defined contribution system immediately, however, until an independent study has been conducted on the costs of the move and the effectiveness of current hybrid pension system.

Senate Republicans caucused twice on the issue, but it became apparent that there were not 20 votes for either the Jansen/Pavlov "compromise".

The Senate Majority opted to run the House version on the floor and despite some attempts to get the 20 votes needed for passage, leadership could only get 16. No Democrats came over to vote in support since they see the bill as taking more money out of the pockets of school employees.

The next step is for Senate Majority Leader Randy RICHARDVILLE (R-Monroe) and House Speaker Jase BOLGER (R-Marshall) to appoint members to a six-member conference committee. Both Richardville and Bolger said today they would name those conferees soon.

The House and Senate will return for an Aug. 15 session and Richardville said MPSERS will be on the agenda.
A Review of the Plan:

Snyder and Republican lawmakers have come to agreement on most of what MPSERS reform will look like. It would require school employees to increase their contributions 4 or 7 percent to their retirement or risk a drop in the multiplier from 1.5 to 1.25. The other option is to freeze their pension benefit and go to a DC system.

It also increases retiree health insurance premium contribution of both current and future retirees to at least 20 percent, capping the MPSERS premium share at 80 percent, unless the retiree is 65 or older by Jan. 1. In that case, he or she will be asked to pay 10 percent.

It eliminates retiree health insurance for new hires and replaces it with an employee match program or money that would go into a health reimbursement account.

It caps the amount schools will pay for the retirement system at the current rate of 24.46 percent of payroll. If these changes to MPSERS aren't finished by Oct. 1, the rate will go to 27 percent, which school administrators fear will put them in a financial bind.

Kurt WEISS, spokesman for Budget Director John NIXON, said the administration would continue to work with lawmakers to get a deal done. Nixon and the Governor's chief lobbyist, Dick POSTHUMUS, were in and out of the Senate and House chambers all day.

The Governor wants to pre-fund school employee health care. That's in SB 1040. The House wants stability to the school districts through the 24.46 percent cap freeze. That's in SB 1040.

But over in the House, Rep. Rick OLSON (R-Saline) said there was resistance to closing down the hybrid teacher retirement system because of concerns about stranded costs. He said until there's a study that looks at whether a move to that system makes sense, he has trouble supporting it.

"I am just reluctant to make that decision on incomplete and biased information," he said.

Sen. Rick JONES (R-Grand Ledge) said he continues to be a no vote until lawmakers vote to start paying 20 percent of their retirement premium like state employees and potentially school employees. Until that's done through passage of his SB 0026, he's a no.

Ten Republicans joined the entire Democratic caucus in voting against the reform to teacher retirement -- Sens. Jack BRANDENBURG (R-Harrison Twp.), Pat COLBECK (R-Canton), Joe HUNE (R-Fowlerville), Jansen, Jones, Arlan MEEKHOF (R-Olive Twp.), Mike NOFS (R-Battle Creek), John PAPPAGEORGE (R-Troy), Pavlov and John PROOS (R-St. Joseph).

Monday, July 16, 2012


The Senate and the House will have a one day session on Wednesday, July 18th.

The Senate is expected to take up the teacher retirement system reform bill that was passed by the House just prior to their last break. As reported by the MIRS NEWS SERVICE, “On the last day of session before summer break, the House passed a version of SB 1040 that kept the hybrid retirement system and prefunds health care, something backed by the Gov. Rick SNYDER administration. But the Senate, which passed legislation establishing a defined contribution system and closing MPSERS, adjourned before taking action after a controversial day ( 6/14/12).”

Today, Senator Mark Jansen (Gaines Township) is telling news sources that he has been working on a proposal that he thinks everyone would “love”. I am not sure it is something teachers would love. Unless you are a newly hired teacher (who is in the hybrid plan), we are all now part of a “defined-benefit plan” or a pension. The Senate wants to shut down MPSERS and move everyone to a “defined contribution plan”’; this is the 407 or similar savings plan that is then invested. This is a much more volatile form of retirement planning to have, as evidenced by the stock market crash in 2008 that wiped out over 50% of many people’s retirement funds.

Senate Appropriations Chair Roger KAHN (R-Saginaw) said, “.... it's important to reform MPSERS and he said his bill will be a "substantial improvement in security" for teacher pension plans. He said the savings can go to the foundation allowances for lower-funded districts, programs like physical education, smaller class sizes and recess monitors.” The state would also freeze the amount contributed by districts to the MPSERS fund to 24 % if reform is passed. However, the officials from the Waterford district have already announced on TV that they would use any dollars saved to plump up their savings accounts. This is a travesty for students and teachers.

Despite the many draw backs of either plan, the Senate’s intent to close down MPSERS is even more dangerous as it stops the funding source for the MPSERS fund. Where will the money come from to fund current retirees or even your own pension fund? Between the dramatic loss of support personnel who were paying into the fund and this future proposed closing of the MPSERS fund, our future retirements are dim.

Please note that none of these reforms is good for our retirements. It breaks promises that all of us have used to plan for our old age. It is also going to increase our contributions from our pay checks by 3 to 5% depending on the final outcome of the vote. 3% of $80,000 dollars is $2400 more per year that you will need to pay to the state. You are already paying this much into that “State Health Care Fund” that is being held in escrow. That means that if you are in a BASIC Retirement plan, you will be sending nearly $5000 from your paycheck to the state per year. It will be more for those who are in the MIP plans.

PLEASE WRITE YOUR SENATOR AND TELL THEM TO LOOK MORE CLOSELY AT APPROVING THE HOUSE’S VERSION OF SB1040. TELL THEM THIS IS THE MOST SECURE WAY TO REFORM MPSERS WITHOUT BREAKING PROMISES AND POTENTIALLY BREAKING THE ENTIRE SYSTEM. But ultimately, they should NOT BE BREAKING promises made to you for your retirement. Doing this after your start date is a huge impediment to your current livelihood and to your ability to fund your retirement.

Also tell your Senator to require districts to use money saved for children’s education and not to fatten their savings accounts.