September 7, 2017
The Legislature was scheduled to meet on August 16, but both chambers announced they would not take roll or conduct any voting on that day. Consequently, only 9 out of 147 lawmakers showed up. However, they return after Labor Day to address some big issues.
KEY FALL TERM ISSUES
Municipal retirement benefits — In interviews with the media, both Governor Snyder and legislative leaders say they intend to take up reforms to municipal pensions and retiree benefit programs. The average municipal public pension system in Michigan is 78 percent funded and that is close to what many experts would say is adequate. But about ten percent are facing collapse. A task force appointed by Snyder sounded alarms but cautioned against a one-size-fits-all-approach to addressing challenges unique to each community and subject to collective bargaining.
Auto no-fault — Michigan has the highest auto insurance rates in the nation, largely because we are the only state with unlimited lifetime medical coverage for injuries caused by auto crashes. Legislators have been working for several years to come up with an alternative that would find majority support in both chambers but have not yet been successful. Detroit Mayor Michael Duggan wants some reform since the rates there are the highest in the state leading to a high proportion of uninsured vehicles.
Education — Evaluation of the quality of public schools is likely to see another overhaul. Current law says the bottom five percent of schools should be closed after three years but when the 38 schools in the bottom five percent were listed earlier this year, the public outcry led to a rescue plan and the schools were not closed. The new federal Every Student Succeeds Act, which replaced the No Child Left Behind Act, requires the state to have an evaluation system. The State Board of Education has approved a dashboard that included comparisons on various measures, but the legislature seems to be leaning toward an A-F grading system.
Mental health — In 2013 the Governor appointed a Mental Health Diversion Council to “reduce the number of people with mental illness or intellectual or developmental disabilities (including comorbid substance addiction) from entering the corrections system, while maintaining public safety.” About 23 percent of Michigan’s more than 41,000 prisoners are classified by the Department of Corrections as mentally ill, and about 64 percent of county jail inmates are so classified. Their care costs the state over twice as much as the average prisoner. In July 2017 House Speaker Tom Leonard (R-DeWitt) appointed a bipartisan task force to hold hearings this summer and develop legislation to address similar issues.
Override — In July the Governor vetoed a bill that would accelerate a planned sales tax break for trade-in vehicles. Motorists who buy a new or used car this year can avoid up to $3,500 in sales taxes by trading in a used vehicle worth at least that much. The maximum exemption is set to increase by $500 every year until the cap is completely lifted by 2039.
The newer proposal Snyder vetoed would have sped up that plan, allowing an owner to exempt the full value of their-trade-in vehicle from the sales tax on a purchase by 2029. It would also immediately exempt the full value of a recreational vehicle trade-in.
The legislation is projected to cost the state about $300 million in sales tax revenue through 2039, according to the House Fiscal Agency. Public education and local government groups opposed the plan because schools and cities receive a portion of state sales tax revenue.
Both Republicans and Democrats have been talking about supporting a veto override since votes on the original bill garnered over two-thirds support. It would take a two-thirds vote in both chambers to do it. If it happens, it will be the first override since Republicans took control of state government in 2011 and one of the few in Michigan’s history.
PUBLICATION OF RETIREE PENSIONS
The Office of Retirement Services informed defined benefit state employee retirees on August 11 by email that American Transparency had filed a Freedom of Information Act request for state and school employee and retiree names and pension information. The ORS email stated that only the retiree’s name, pension amount, and retirement effective date was released. Sensitive information such as Social Security number, date of birth, contact information, beneficiary information, or medical records were not released.
American Transparency is a 501(c)3 nonprofit organization headquartered in Burr Ridge, Illinois (near Chicago) whose purpose is to capture and post all disclosed spending at every level of government. It was founded by Adam Andrzejewski, an unsuccessful candidate for Governor in the Illinois Republican primary of 2010. American Transparency claims to have captured nearly 4 billion public expenditures and made them available through its Website www.openthebooks.com. It claims that this is the third year that it has filed a FOIA request with the Michigan Office of Retirement Services and that it has over 148,000 names and pension amounts for SOM retirees on its searchable database. However, my search revealed only about 1,000 names and monthly benefit amounts from 2014 and 2015 for state employee retirees. There are nearly 59,000 SOM defined benefit retirees.
From its latest IRS filing, American Transparency appears to have just two employees based in Illinois (including Andrzejewski), a strategy and relationship management contractor in New York City and a communications contractor in Fairfax, Virginia near Washington, DC. Its total revenues exceeded $1.1 million in 2015 but donor information was not disclosed.
Some SERA members have expressed outrage that their names and pension amounts were released. In a reply to SERA’s inquiry, the ORS said that FOIA required the release. SERA is researching whether we can get a legislative solution to prevent the disclosure in the future.
COLLECTIVE BARGAINING OVERHAUL PROPOSED
The Michigan Civil Service Commission is proposing sweeping changes to the collective bargaining system for state employees now that Governor Snyder has appointed three of the four Commissioners. Some of the collective bargaining rollbacks are:
Additionally, the proposed amendments also include a new rule creating a pilot program to allow agencies to adjust compensation up to 20 percent of pay for a small number of critical positions occupied by Non-Exclusively Represented Employees for management to recognize outstanding performance in mission-critical positions.
The Coalition of State Employee Unions has called upon the Commission to reject the proposed rule changes, saying they would severely limit the collective bargaining process and undermine the rights of state employees.
If adopted, the proposed changes would not take effect until January 1, 2019 when currently approved labor contracts expire. Michigan SERA Coordinating Council’s Executive Board authorized sending a letter to the Commission in opposition to the proposed changes.
RETIREMENT BOARD ADOPTS NEW FORMULA
At the quarterly meeting of the State of Michigan Retirement Board on Thursday, August 24, the majority of the Board adopted a new method for determining the assumed rate of investment return.
Currently the Assumed Rate of Return (AROR) is 7.5 percent, recently lowered from 8 percent. The AROR is used in the calculation of what the State of Michigan has to contribute to the state employee defined benefit pension fund. When there is a high AROR, the employer has to contribute less than when there is a lower AROR.
In the past, excess investment gains over the AROR percent have been used to reduce employer contributions. Under the new formula, if the market exceeds the AROR, excess investment gains over the AROR will be used in a formula to reduce the AROR. An example is that if the investment experience in a year is 8.97%, the AROR would be reduced from 7.5% to 7.4%. In bad investment years, the AROR will not change. California uses this system. Likely more information will be forthcoming in the October edition of the ORS newsletter for retirees, Connections.
BALLOT PROPOSAL UPDATE
Redistricing — On August 17 after 55 days of review and six drafts, the Board of State Canvassers approved as to form the Voters Not Politicians ballot proposal to remove the drawing of political district lines for Congressional and state legislative districts from the legislature and governor and transfer the responsibility to an independent Citizens Redistricting Commission. The purpose is to end gerrymandering in Michigan. The proposal would alter 13 articles in Michigan’s Constitution and affect all three branches of state.
Approval of the ballot proposal language has already engendered opposition and a complaint filed with the Attorney General’s office. Republican strategist Robert LaBrant complaint alleges that the Bureau of Elections acted improperly when advising Voters Not Politicians. He wrote that the bureau’s review of the petition language was a misplaced, over-zealous attempt at being customer friendly and went far beyond formatting issues, providing suggestions and critiques of the text in the proposal. He asserted that “It is not the role of the Election Bureau to provide drafting or legal advice to a ballot question.”
Michigan SERA Executive Board has endorsed the VNP effort and encourages its chapters and members to get involved by inviting a speaker from the ballot committee Voters Not Politicians or Count Mi Vote to chapter or other meetings and members should volunteer to help collect signatures this fall by signing up at the Web sites. Friend these two organizations on Facebook here and here to keep informed about the campaign. Information is available at www.votersnotpoliticians.com.
Marijuana —A second marijuana ballot proposal language was approved as to form by the Board of State Canvassers on August 17. This one is a proposed constitutional amendment to legalize agricultural, personal, recreational, medicinal, commercial and industrial use of cannabis and prohibit taxation or regulation of it. It is sponsored by a Midland-based group, Abrogate Prohibition Michigan. If the proposal passed it would be far more extensive than the MI Legalize proposal now collecting signatures to create an initiated act to regulate marijuana similarly to alcohol.
Sick Time — For the third consecutive year, the canvassers approved the form of a petition for an initiated act that would allow workers to earn and use sick time. The previous petition efforts failed to get enough signatures to put the issue on the ballot or have the Legislature enact it.
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 email@example.com.
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