Like basketball March Madness, March Madness at the Capitol is all about competition, competition for dollars, that is. The Governor’s budget and appropriation bills were introduced in February and Appropriations Subcommittees have been busy meeting since then to decide how to spend state revenues in FY 2013. Since unemployment is down to 8.8 percent, economic activity has increased with a commensurate small increase in state revenues and competition for those dollars.
Huge cuts to some programs were enacted for FY 2012 to help finance the $1.8 billion business tax cut. For FY 2013, some programs may see small increases because of the revenue uptick. The appropriations committees seem to be showing more independence from the Governor’s budget proposals this year compared to last year. Proposals to privatize more state government programs are proceeding at a fast clip including privatizing most child welfare services in Kent County, privatizing eligibility determination for Medicaid, and the possible privatization of the Maxey Training School, one of the state’s main juvenile justice facilities. The proposed Department of Corrections budget cuts 580 non-officer positions and closes a prison. The various proposals will be worked out in the coming weeks.
Pre-funding State Retiree Benefits
Among the appropriations bills of interest to SERA was a supplemental appropriations bill for FY 2012 to ensure some pre-funding of other post-employment benefits (health, dental, vision, and life insurance) for state employee retirees. The bill contained $144.5 million from the general fund. With the supplemental and money already budgeted, the state will have dedicated $717 million in the 2011-12 fiscal year toward paying the health care costs of retired state employees. Governor Snyder has signed the bill and it is now PA 64 of 2012.
Before FY 2012, our state retiree benefits were paid on a cash basis each year with no assets in reserve. Under a cash basis, the unfunded accrued liability for these benefits was estimated at $15.2 billion. However, beginning the process of prefunding retiree benefits for state employees results in an estimated decline of nearly $6.0 billion in the unfunded accrued liability to $9.4 billion, which reflects assumed investment returns available if the State makes yearly payments at prefunding levels, and if market returns materialize at the assumed rate. If these assumptions hold true and the State appropriates the amount necessary to prefund each year for the next 26 years, then the unfunded liability will be paid off at that time, and State costs for retiree health care will drop to 2% of payroll. The task now will be to prevent attempted raids on these funds.
Election Season Is Upon Us
The Michigan Democrats held a nominating convention on March 10 for the statewide posts including U.S. Senate, three seats on the Michigan Supreme Court, and the four education boards. The Michigan Republicans will have their convention on May 19. All U.S. and Michigan House of Representative seats will be on the ballot as well as local government and judicial posts.
SERA chapters should consider having candidates for Michigan House of Representative seats come to a chapter meeting to introduce themselves. These are the people who vote on bills affecting our pensions, benefits, and other public policy affecting our everyday lives. Candidates don’t have to file until May 15 but many are campaigning right now. The primary will be held August 7 and in most areas of the state, the primary is determinative of who will win in the general election on November 6.
Ballot Issue Update
If proponents are successful, we could have seven or more issues on the November ballot. They include:
Another potential ballot issue concerns funding for roads. Governor Snyder has proposed replacing the current 19-cent per gallon gasoline tax with a tax based on a percentage of the wholesale price of fuel as well as an average increase in vehicle registration fees of $60 per vehicle. Those moves would raise the $1.4 billion most agree is needed to properly maintain the state’s road system.
Legislators are concerned about a public backlash to a big tax or fee increase. Gongwer News Service reports that Senate Majority Leader Randy Richardville is considering putting proposals to raise revenues to fund road repairs on the August ballot as a way to jump-start action on the issue. It would require voters to choose between two plans, similar to the model for the landmark Proposal A school funding reform of 1994. The status quo would not be an option.
Protect Our Jobs
The Protect Our Jobs constitutional amendment would create a right to collective bargaining in Michigan. It is proposed as a result of over 80 bills reducing unionization rights in Michigan.
Of interest to state employees and state retirees is that the proposal contains a provision to assure constitutionally-protected collective bargaining rights for state employee unions similar to that which the state police troopers achieved through a constitutional amendment in 1978. The proposed amendment includes the right to bargain retirement and pensions.
In a 1981 Opinion, Attorney General Frank Kelley affirmed that the Michigan State Police Troopers Association and the State Employer could negotiate modifications in the pension plan such as different contributions or benefits. If the Legislature did not reject the modifications by a 2/3 vote of both houses, the modifications would go into effect. In practice, bargained modifications to the pension plan for MSPTA members are subsequently put into statute so that supervisory, managerial, and confidential employees have the benefit of the same modifications.
At its meeting on April 5, the SERA State Coordinating Council Executive Committee heard a presentation from a representative of the Protect Our Jobs coalition. Subsequently it endorsed the ballot proposal and urged the SERA State Coordinating Council to support the effort at its May 4 quarterly meeting.
The proposed paragraph that would be added to Article XI, Section 5 of the Michigan Constitution:
Classified state civil service employees shall, through their exclusive representative, have the right to bargain collectively with their employer concerning conditions of their employment, compensation, hours, working conditions, retirement, pensions, and other aspects of employment except promotions, which will be determined by competitive examination and performance on the basis of merit, efficiency and fitness.
Nearly 323,000 valid signatures will be needed by July 9 to get the amendment on the November ballot. The Governor has said that he considers both proposals to pass Right To Work legislation and the Protect Our Jobs amendment to be divisive at a time when the Michigan economy is starting to recover and we want to attract more business to Michigan. The Chamber of Commerce has said it will fight fire with fire and initiate a counter petition drive.
School Employee Retirement Reform Bill Introduced
Most current public school employees wanting to keep their pension benefits would have to contribute at least 5 percent and as much as 8 percent of their salary to the system (in addition to the 3 percent they are already paying for retiree health care) under a massive restructuring of the school employee retirement system introduced March 22. Sponsors of SB 1040 say it will address the $45 billion in unfunded liability in the system and reduce how much of the School Aid Fund has to go toward the Michigan Public School Employees Retirement System and instead free up that money for actual K-12 instruction.
School retirees would have to pay 20 percent of the cost of their health insurance premium, up from 10 percent. Sen. Caswell has asked the Senate Fiscal Agency to cost out reducing that to 10%. If the bill is changed to reduce the retiree health insurance premium, it would be logical to ask for a similar amendment to the State Employees’ Retirement Act. Hearings on the bill are scheduled during April with plans to get the bill to the Governor by June.
Other Capitol News
A second attempt to recall Governor Snyder has been initiated in Washtenaw County. Sponsor of the petition drive, Michigan Rising, has said it will likely center its campaign on education cuts, the pension tax and the lack of shared sacrifice. An April 9 clarity hearing approved the language for the petition. The group would have 90 days to collect the nearly 900,000 required signatures of registered voters to put a recall election on the ballot. The petition would be good for 180 days, but each signature is only valid for 90 days. The official kickoff for the second-time-around recall effort is 2 p.m. May 5 at the Capitol. The same group was only able to collect 500,000 signatures in the first attempt last year.
The Michigan Supreme Court has rejected on a eight to one vote a request from Attorney General Bill Schuette that it directly hear his case against the Civil Service Commission’s awarding of benefits to unrelated adults living with state employees and bypass the Court of Appeals. Last May, Mr. Schuette challenged the legality of the Civil Service Commission’s action, asserting that it exceeded the Commission’s authority and violated the rights of family members of state employees who are not eligible for benefits because it allows non-family members to be eligible. Under the policy, one unrelated adult living with a state employee can receive state health benefits, as can any dependents of that adult.
The Michigan Catastrophic Claims Association has announced a new record assessment for car and truck insurance of $175 a year. This is $30 more than last year and will go into effect July 1. The assessment covers the ongoing costs of lifetime medical care for individuals who suffer catastrophic injuries from automotive accidents authorized under the automotive no-fault insurance act. The Association is not subject to the Open Meetings Act or the Freedom of Information Act so consumer advocates have been unable to know very much about the basis for the increase. The Legislature is considering modifications to the auto no-fault law to reduce the unlimited medical benefits it now requires.
Meanwhile the Michigan Legislature has passed repeal of the motorcycle helmet law. It would allow riders 21 and older to go helmetless if they have $20,000 in health insurance coverage and meet experience or training requirements. Governor Granholm vetoed the bill twice; Governor Snyder has until April 16 to take action on the bill.
The minimum income at which Michigan residents will have to pay taxes will fall below the poverty line under the recent changes in the state’s tax laws, according to a report by the Center on Budget and Policy Priorities released recently by the Michigan League for Human Services. With the reductions to the Earned Income Tax Credit and Homestead Property Tax Credit, a two-parent family earning at the federal poverty line would see state taxes increase $678 in 2012 over what the family paid in 2011, the report said.
The Center for Public Integrity, Public Radio International and Global Integrity has given Michigan and several other states a failing grade in a recent national study on state government transparency or accountability. The study said out of 14 categories, Michigan got an A on internal auditing and Bs on two factors for its budget process and its procurement system, but a D on public access to information. Michigan was given an F on all the other factors, which were: executive accountability, judicial accountability, civil service management, pension fund management, political financing, legislative accountability, lobbying disclosure, ethics enforcement agencies and redistricting. Civil Service and pension fund management have told SERA that Michigan’s failing grades on those factors were because the criteria used in the study were not applicable to Michigan. Michigan ranked 43rd overall in terms of public accountability, according to the study.
Want to check the claims of national political candidates or independent committees about a political issue? A good source is the Annenberg Public Policy Center at factcheck.org or the Pulitizer Prize-winning politifact.com.
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. Write to firstname.lastname@example.org giving your name and chapter.
Editor’s note: Mary Pollock is the newly appointed 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 email@example.com.
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