Capitol News
May 5, 2019
The Governor is still traveling the state touting her budget and policy priorities; the GOP-led legislative appropriation committees are moving their bills without her 45 cent gas tax increase, and a federal court decision rocked the capitol this month.
ILLEGAL GERRYMANDER
On April 25, a three-judge federal panel held that Michigan Republicans’ redistricting in 2011 was so partisan that it constituted an illegal gerrymander, and has ordered special elections in 34 state House, state Senate and Michigan’s U.S. Congressional districts in 2020. At least 9 congressional districts, 10 state Senate districts and 15 state House seats are affected, but adjacent districts would likely have boundaries redrawn as well, potentially affecting most of the 38 Senate districts, 110 House districts, and 14 Congressional districts. The GOP-drawn districts have consistently allowed Republicans to maintain strong majorities in the state Senate, House, and Congressional delegation, even though Republicans typically receive roughly 50 percent or less of total votes across the state.
State Senators — The 4-year terms of recently elected and re-elected state Senators may be cut to two years in special court-ordered 2020 elections because the Michigan Constitution permits Senators to only run twice for Senate seats. The court acknowledged the issue but said “legislators elected under an unconstitutional apportionment plan does not outweigh the constitutional rights of millions of Michiganders to elect their senators under constitutional maps.“
Constitutional violation — The court found that Republicans’ method for redrawing Michigan’s political districts violated Democratic voters’ First and 14th "Amendment rights because it deliberately diluted the power of their votes by placing them in districts that were intentionally drawn to ensure a particular partisan outcome in each district. Entered into evidence were emails from 2011 from GOP staffers bragging about trying to “cram Dem garbage“ in southeast Michigan districts. During the trial, George Washington University political scientist Christopher Warshaw testified the Michigan Senate maps “have more pro-Republican bias than 99.7 percent of all state Legislature maps across the country in the last 45 years.“ The court agreed, saying the 2011 maps are a “political gerrymander of historical proportions.“
August 1 Deadline — The lawsuit was brought by the League of Women Voters and several Democratic voters in Michigan. The GOP-dominated Michigan Legislature and Democratic Governor Gretchen Whitmer have until August 1 to redraw the district boundaries the court said. The court threatened that it would appoint a special master to draw the lines if lawmakers failed to act by the deadline.
Appeal — On April 30, Michigan Republicans filed a notice of an appeal to the U.S. Supreme Court. Likely Republicans will ask that the lower court’s ruling be stayed, or delayed, until the high court decides similar cases involving redistricting disputes in Maryland (a Democrat gerrymander) and North Carolina (a Republican gerrymander) expected in June. Though the U.S. Supreme Court has held it is unlawful to draw political district lines to discriminate on the basis of race, it has yet to rule on whether drawing lines to help one party and hurt another is illegal.
Proposal 2 — Michigan voters last fall approved a ballot measure to amend the Michigan Constitution to create an independent citizen’s redistricting commission to oversee the political district boundary drawing. The first election under districts following the commission’s work would be in 2022, after the 2020 Census. The court’s April 25 decision will use the 2010 Census to re-draw the lines.
LAME DUCK “ADOPT AND AMEND”
In September 2018, the Legislature adopted voter-initiated laws increasing the minimum wage and requiring paid sick time. After the November 2018 election, Republican lawmakers passed scaled-back, employer-friendly versions of those proposals, which then-Governor Rick Snyder signed into law. Supporters of the initiative petitions said the move was unconstitutional since the laws were adopted and amended in the same legislative session. Republicans have maintained the amendments were proper.
The Michigan Supreme Court has agreed to hear oral arguments on whether it should issue an advisory opinion on the “adopt and amend in the same legislative session“ strategy under Michigan’s constitution. The Michigan SERA Coordinating Council has decided to participate in a friend-of-the-court brief along with other non-partisan, non-profit organizations opposing “adopt and amend.“ Oral argument will be held July 17 at 9:30 a.m. The Michigan Supreme Court may or may not choose to issue an advisory opinion on the matter after hearing oral argument.
ANNUITY BILL
Veto — A bill to offer annuities to state employees is back again despite Governor Snyder’s veto of a similar bill at the end of 2018,. In his veto message, Snyder said “As fiduciaries of the state’s retirement systems, the Treasurer and the new State of Michigan Investment Board are responsible for the mix of retirement offerings provided to employees. I believe it is inappropriate for the Legislature, which does not have fiduciary responsibility for plan participants, to legislatively decide what options are offered to employees.“
The annuity bill, HB 4275 of 2019 sponsored by State Rep. Tom Albert (R-Lowell), received a hearing in the House Committee on Financial Services on April 17. Rep. Albert worked as an investor for the State of Michigan Office of Retirement Systems after completing his MBA in 2013. He was elected to the House in 2016 and re-elected in 2018.
What it does — HB 4275 would amend the State Employees’ Retirement Act to require the state to provide annuity options for employees and retirees in the defined contribution (401k) retirement plans. Those are employees who joined state government on or after April 1, 1997. The bill would require access to at least one fixed annuity option and at least one variable annuity option, in addition to currently offered investment options. The annuity options would have to allow a DC participant, while employed, to purchase a fixed rate annuity, and could allow a DC participant, while employed, to purchase a variable rate annuity. The state would have to competitively bid the annuity options under standards provided in the bill.
Treasury position — Whereas last legislative session the Department of Treasury was at first neutral on the bill in the House, and then changed its position to positive in the Senate, this session Treasury sent one of its top people from the Bureau of Investments, Greg Parker, Asset Allocation Director, to testify against the bill as introduced. He expressed five concerns: 1) Under the-Governor Snyder’s EO 2018-10, investment responsibility for the retirement systems is assigned to the State of Michigan Investment Board, consisting of the State Treasurer as chair, the budget director and three people with experience in financial investments appointed by the governor; 2) All DC participants can annuitize at retirement but only 10 have done so, indicating there is not much demand; 3) The value of annuities is lower than average investments; 4) The benefit of an annuity to younger employees is not great; it is better to invest in the market; 5) The irrevocability of annuities compared to the flexibility of defined contribution investments argues against them.
Additionally, variable rate annuities are complex due to the many variables involved and therefore more difficult to monitor. Disclosure requirements can be complex. The cost of the investment can be hard to determine. Other problems with the bill: how often should it be bid out; what is the backstop if financial difficulties arise with the company; there is a likelihood of an unknown number of unknowns.
No vote was taken, but likely amendments are needed if the idea is to gain Treasury’s and the Governor’s approval. A similar bill affecting the Michigan School Employees’ Retirement System is HB 4274.
STATE RETIREMENT SYSTEM CHANGES INTRODUCED
State Rep. Tom Albert (R-Lowell) has introduced HBs 4530-34 to change some of the investment assumptions in the state employee defined benefit retirement system (effectively removing some discretion from the State of Michigan Retirement Board and the Office of Retirement Services) and giving the legislative branch an auditor role over the state employee retirement system.
According to Rep. Albert’s news release, the bills in the legislative package seek to:
- Cap the assumed rate of return and discount rate of investments at 6 percent;
- Require any difference in a pre-determined annual retirement contribution payment and actual annual retirement contribution payments be paid off within one year by the state instead of the current five years. Current projections often fall short of actual required amounts;
- Require each retirement system use up-to-date mortality tables, and;
- Require each system to use layered amortization to pay off any new debt within a new, fixed 10-year period.
HB 4534 would create a Michigan Legislative Auditor position, responsible for evaluating the soundness of retirement systems but not charged with making actuarial decisions.
The bills also remove retiree healthcare access for the positions of Governor, Lieutenant Governor, Secretary of State, Attorney General and Supreme Court Justice. These positions are the only remaining state positions with pension availability instead of a 401k plan.
The bills have been referred to the House Appropriations Committee for consideration.
ELDER ABUSE PACKAGE
A hearing was held in the Michigan House Families, Children, and Seniors Committee on May 1 about an eight-bill bipartisan package of bills to add legal protections for all adults age 65 and older to those already in place for vulnerable adults of any age. And the bills establish increased criminal penalties for individuals who financially or physically abuse vulnerable and elder adults 65 or older. The bills are HB 4254 through 4260, and HB 4265.
In explaining the need for the bills, bill sponsors Rep. Doug Wozniak (R-Shelby Township) and Rep. Sara Anthony (D-Lansing) testified that “As of 2016, it’s estimated that 16.2 percent of Michigan residents are over the age of 65, with that percentage expected to rise each year. It’s reported that more than one in ten elder adults experience elder abuse. Additionally, it’s estimated only about one in five cases of elder abuse are ever reported. Unfortunately, about two thirds of perpetrators of elder abuse are family members of the elderly adult. It’s increasingly important for our state to take proactive steps to combat elder abuse, whether it be physical abuse or financial fraud. This legislation will increase protections for seniors and give law enforcement the tools to crack down on abuse.“
Financial exploitation affects at least 5 percent of older Americans. Victims’ average age is 75, and African-Americans, the poor, disabled people, and elderly people living alone are common targets.
There was no vote on the bills, but they seem to have no opposition.
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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