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).