Capitol News
November 2011
As of the end of October, Governor Snyder had signed 209 bills into law and more are on the way. The Michigan Senate has introduced 799 bills and the Michigan House 1,151 bills since January, and that doesn’t include the many resolutions, joint resolutions, and concurrent resolutions.
As of this writing, November 5, the Michigan Supreme Court has not issued its advisory opinion on the pension tax. If the Supreme Court rules adversely to us, a lawsuit can still be filed challenging the pension tax. If the Supreme Court rules the pension tax is unconstitutional, pension administrators are going to have to quickly adjust their plans to take 4.35% out of pensions for those born after 1945.
Pension Tax and Withholding
You should have received your Connections newsletter in your Electronic Funds Transfer quarterly report from the Office of Retirement Services. It provided ORS’s instructions on withholding in anticipation of the new pension tax going into effect January 1, 2012.
It says that if you or your spouse was born before 1946, ORS will not withhold Michigan income tax from your pension unless you request it.
If you were born after 1946 and are a Michigan resident, ORS will automatically establish a withholding amount based on your federal income tax exemptions on file with ORS. If you prefer a different withholding amount, you will need to change your exemptions for state withholding. If you want that change to take effect with your January pension payment, you will need to go into MiAccount to change it on or after December 23, 2011, and before January 10, 2012.
If you are not a Michigan resident, the income tax doesn’t apply to you.
Connections suggests that you may want to consult a tax professional about adjusting your withholding amount. Regardless of your age, that advice is especially good if you typically claim any Michigan tax credit, subtraction, exemption, or deduction on your state tax return because most of those were abolished in the new tax law. All of us 65 and older will lose the $2,300 special senior exemption and that will cost us about $100 in increased income tax for the year.
Look at your 2010 state tax return and see if you claimed a credit, subtraction, exemption, or deduction that has been abolished. If you received a state tax refund for tax year 2010 for instance, you may have received a Homestead Property Tax Credit. The HPTC is changing significantly for seniors with total household resources above $21,000. It may be wise for you to withhold from your pension so that you are not surprised with a big state tax liability in the spring of 2013. Worse, you may be subject to penalties and interest if your tax liability exceeds $500 and you failed to make quarterly estimated payments. The Michigan Department of Treasury has a video and a written summary of the tax changes that you can view or print and read at your leisure. See www.michigan.gov/taxes.
Union Bargaining Agreements
The state employee coalition of unions and the Office of the State Employer have reached a tentative agreement on wages and benefits for FY 2013 and FY 2014:
- Unionized state employees would receive a 1-percent base pay increase in FY 2013 beginning October 1, 2012, and a 1-percent lump payment of their base wages for FY 13 and FY 14.
- The unions agreed to pay a 20 percent health care premium for PPO plans and a 15 percent premium for HMO plans.
- Annual leave will be calculated as time not worked when determining overtime in a pay period.
- A joint healthcare committee will be formed with the goal of finding savings.
Unions are trying for ratification by December 1, less than a week before the December 7 Civil Service Commission meeting where the Commission will consider approving it. If it's not ratified or the Commission does not approve all provisions, the impasse process will proceed. SERA will be actively watching any joint healthcare committee formed for impact on retiree health care.
Future Retiree Health Care Bills Approved By House
HB 4701 and HB 4702, although improved since their introduction, would radically alter future state employee retiree health care financing if they become law. SERA testified against the original bill (see our testimony page).
The main bill, HB 4701, would:
- Require state employees in the defined benefit (DB) plan to choose between remaining in the plan and contributing 4% of their compensation toward the pension plan or freezing their DB pension benefit and continuing their future service under the defined contribution (DC) plan.
- Eliminate retiree health insurance for employees hired on or after January 1, 2012, and replace it with a 401(k) plan employer match option of up to 2% of compensation plus a lump sum deposit of either $1,000 or $2,000 into a Health Reimbursement Account (HRA) upon termination of employment.
- Provide existing Defined Contribution plan employees (hired between March 31, 1997 and December 31, 2011) the option of retaining the current retirement graded premium health insurance plan or switching to the 401(k) plan employer match option of up to 2% of compensation.
- Eliminate the 3% employee contribution for retiree health care required of all employees since November 2010 and refund the contributions to employees with interest.
- Exclude overtime pay earned after January 1, 2012, from calculation of income in final average compensation.
- Revise current DC matching provisions to create an automatic enrollment for employee contributions up to the state matching provisions and allow the state to match employee contributions into a 457 plan as well as the current 401(k) plans.
- Establish Health Reimbursement Accounts for employees within the irrevocable health care trusts established in 2010 to receive and hold employer and employee contributions for retiree health benefits or reimbursement of medical expenses.
The substitute HB 4701 (H-6) was some improvement over the original bill. At least there is some employer contribution (2%) for retiree health care for new employees. The original bill just gave them $2,000 upon retirement! The bill will apparently assure that the 5,900 recent retirees who paid into the mandatory 3% contribution while they were still working will get their money. Democrats tried to strip out the token appropriation in the bill designed to make it “referendum proof,” but lost on a voice vote. Other attempted amendments also failed. HB 4701 and 4702 now go to the Senate for consideration.
Constitutional Amendments to Gut Civil Service Introduced
Senator Mark Jansen, Chair of the Senate Reforms Committee, and Senators Caswell, Proos, Green, Pappageorge, and Schuitmaker introduced SJR O, which proposes a constitutional amendment to severely curtail the powers of the Civil Service Commission. The proposed constitutional amendment would:
- Remove the CSC’s authority for setting pay and benefits;
- End the CSC’s authority to review proposals to outsource state work to private contractors;
- Repeal the CSC’s authority for making rules and regulations covering all personnel transactions such as collective bargaining, grievance systems, selection, layoff methods, leave of absence, equal employment opportunity, and many more;
- Eliminate the 1% of payroll funding for the CSC that keeps it independent of political pressure from the Governor and legislature;
- Cease domestic partner benefits for unmarried employees;
Senator Dave Robertson is the sponsor of SJR P, a proposed constitutional amendment to set aside 1% of state employee jobs for political appointments. He explained that state government has increased in size and complexity since 1963, the date of our last constitution, and with term limits, the Governor needs to be given more power to run the executive branch. Currently the Michigan Constitution allows five unclassifieds in addition to a department director in each department. A Detroit News poll of its on-line readers about SJR P had it running 94% opposed.
Although these proposals could gain the 2/3 majority they need in the Michigan Senate because 26 of the 38 Senators are Republicans, the Republicans do not have a 2/3 majority in the Michigan House to pass them.
AG v CSC: Domestic Partner Benefit Update
On October 6, Ingham County Circuit Court Judge Paula Manderfield rejected the Attorney General’s challenge of the Michigan Civil Service Commission’s decision to provide domestic partner benefits for state employees. The AG challenged the benefit on two grounds: (1) that the policy exceeds the scope of the CSC’s legislative authority under Art. 11 Sec. 5 of the Michigan Constitution, and (2) that the policy violates the Equal Protection Clause of the Michigan Constitution.
The court denied both counts. The AG has appealed the trial court decision with the Court of Appeals.
In a related effort to stop domestic partner benefits, the Michigan House has passed HB 4770 and 4771, which would prohibit all pubic employers, including state government, from offering the benefits. Such a bill, if passed and signed into law, is unenforceable as applied to state classified employees for the reasons set forth in Judge Manderfield’s decision. The Senate Committee on Reforms, Restructuring, and Reinventing had a hearing on the bills passed by the House and reported both bills favorably. They now await Senate floor action.
The State Employee Retirees Association opposes the legislature’s attempt to intrude into the powers of the MCSC and interfere with state employee collective bargaining agreements.
Tidbits
A link on a story in the on-line Detroit News was titled “Database: Look up state retiree pensions” (Detroit News, 11/1/2011). The link takes you to a statement from the DN that it intends to release the database when the story is ready. So get ready for yet another hit piece on public employees and retirees.
An initiative petition to repeal certain parts of the Emergency Manager law has apparently collected 130,000 verified voter signatures. Stand Up for Democracy Now needs 161,305 valid signatures of registered voters by the end of March to put the measure on the November 2012 ballot. Meanwhile a lawsuit has been filed challenging the law; the Governor has asked the Michigan Supreme Court for an advisory opinion on the matter.
There are 26 Republican and 6 Democratic legislators with recall petitions approved as to clarity and circulating for signatures. There are 2 Republican and 10 Democratic legislators with recall petitions rejected for lack of clarity. These can be resubmitted.
The Michigan Senate passed an anti-school bullying bill SB 137 with a controversial clause that would permit bullying for moral conviction or religious beliefs. Minority Leader Senator Gretchen Whitmer’s fiery floor speech opposing the bill was posted on YouTube and went viral when it was reposted by the Washington Post and others. Time.com, the New York Daily News, the Huffington Post, and Talking Points Memo all had stories on the bill. State School Superintendent Mike Flanagan called the bill “a joke.” The father of the student for whom the bill is named condemned the legislation. American Family Association of Michigan head Gary Glenn claims the controversial provision protects free speech rights.
Hearings continue in both the House and Senate Committees on a proposal to eliminate unlimited catastrophic care auto insurance coverage. Billboards are starting to appear on the roads leading to and from Lansing in an effort to sway legislators and arouse public support.
News of the Day — If you are a SERA member, you are eligible to receive News of the Day, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. There are nearly 500 subscribers. If you would like to receive this e-mail, please write to michigansera@comcast.net giving your name and chapter.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail michigansera@comcast.net.
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