Capitol News
July 7, 2019
For the last 8 years, the GOP-led Michigan legislature finished the budget in mid-June, the Republican Governor signed it promptly, and everyone left for the summer. This year with a GOP-led legislature and a Democratic Governor disagreeing on budget priorities, school districts, public universities, community colleges and local governments whose fiscal years begin July 1 will just have to wait to find out what their state aid will be.
Both the House and Senate have passed their ideal budget plans and have established conference committees to work through differences. Neither chamber’s Republican leaders were agreeable to Whitmer’s budget proposal, which would infuse new infrastructure funding into the state budget with a 45-cent gas tax increase. House Democrats recently issued their own ideas on raising additional funding for roads, including a corporate income tax hike and additional taxes and tolls on heavy trucks that would produce half the $2.5 billion needed.
On June 13 the House and Senate released updated session calendars for July and August listing most days for tentative session. So far neither chamber has actually met since adjourning June 21. A budget must be adopted by midnight September 30 or we will face a state government shut-down last experienced in 2009.
PENSION BONDS FOR ROADS?
WMPF proposal — The West Michigan Policy Forum composed of business and community leaders has proposed the state sell 30-year pension obligation bonds to borrow $10 billion that would be used to pay down unfunded liabilities to its pension funds. This would free up nearly $1 billion a year in the current state budget that could be used for other purposes such as fixing the roads without raising taxes.
Borrow now, pay later — The state currently expects to pay off over $29 billion in teacher pension unfunded liabilities and $6 billion in state employee pension unfunded liabilities in 21 years. The WMPF proposal would instead require the state to repay the new bond within 30 years. Borrowing the money through bonding would cost the state interest on the bonds, though there is always the possibility that the state could invest the money and exceed the cost of borrowing it. However, the national Government Finance Officers Association in 2015 adopted an advisory warning against pension obligation bonds. Generating revenue from pension investments that tops bond interest rates is a “very speculative” goal, the association said.
Former Speaker of the House Jase Bolger, spokesperson for the WMPF, said he anticipates annual interest payments of about 4 percent on a pension obligation bond and said the stock market “over the long term” has performed much stronger than that. The state could reduce risk by investing the $10 billion over time instead of all at once to limit the impact of market corrections or recessions, he said.
Another POV — Anderson Economic Group CEO Patrick Anderson, who served as deputy budget director during the administration of Republican former Governor John Engler, said the pension bonding idea is dumb. He found in a study for the Macomb Intermediate School District that a 40-year payment schedule for the state’s unfunded liabilities in that district would cost the state an additional $30 billion and a 50-year payment schedule would cost an additional $45 billion. He said the roads being fixed may last up to 10 years, much less than the payoff of unfunded liabilities. Anderson also contends the proposal could potentially violate provisions in the state Constitution related to requiring voter approval of general obligation debt, the requirement to have a balanced budget, and requirements of having all pensions funded.
Coalition opposes — The Coalition for a Secure Retirement, composed of public employee organizations including SERA, sent a letter to Governor Gretchen Whitmer, Budget Director Chris Kolb, Office of Retirement Service Director Kerrie VandenBosch, and majority and minority leaders in the Senate and House objecting to the proposal. The letter said that such a plan would endanger future retirement benefits for employees. It explained its reasoning:
During the Great Recession a decade ago, the State Employees’ Retirement Systems (SERS) and MPSERS funds were used to fill gaps in a struggling state budget. Changes were made in actuarial projections that allowed the state to underfund the State Employee Retirement System and Michigan Public School Employee Retiree System by hundreds of millions of dollars. This, combined with a drop in investment returns, contributed to having the actuarial funding of the systems decline from over 90% in 2006 to less than 60% in 2017.
Over the last decade, the unfunded actuarially accrued liability (UAAL) of SERS climbed to over $6 billion and the UAAL of MPSERS climbed to over $30 billion. This resulted in major benefit cuts in retirement health care in both systems, and the conversion of the MPSERS system to a hybrid which provides a reduced pension benefit for school employees. It also resulted in the state dedicating additional funds to address the pension debts, and realigning projected investment revenue and member mortality projections.
The bad news is public employees have given up huge concessions in retirement security through statutory changes in the system. The good news is, after ten years of declines, these critical retirement systems are finally beginning to climb back toward a safe level. Unfortunately, those gains have apparently made it once again a target for short-sighted policy makers who again seek to underfund the system in order to fill gaps in other spending priorities.
Contact your state legislators — State legislators need to hear from state employee retirees about risking our pension funds to temporarily support other state obligations such as fixing the roads. Fixing the roads requires a permanent source of revenue, not putting up state pensions as collateral for a loan. You can find the contact information for your state senator and representative at www.michiganlegislature.org.
AUTO NO-FAULT INSURANCE UPDATE
The new auto no-fault insurance law signed into law on May 30 created five coverage level options for automobile Personal Injury Protection (PIP) issued or renewed after July 1, 2020 with promised PIP premium rate reductions until July 1, 2028:
- Unlimited coverage limit (the current law - 10% reduction in PIP premium)
- $500,000 coverage limit (20% reduction in PIP premium)
- $250,000 coverage limit (35% reduction in PIP premium)
- $50,000 coverage limit option available only to those enrolled in Medicaid. (45% reduction in PIP premium)
- No PIP coverage option (100% reduction in PIP premium) available to individuals eligible for Medicare or other qualified health coverage (such as employer-provided health insurance covering injuries from traffic crashes and the deductible is no more $6,000 per person).
Since premium savings in the last option will be attractive to state employee retirees with Medicare, it is important to know just exactly what giving up PIP coverage would mean. State employee retirees have supplemental health insurance by BCBS or an HMO to cover some of the costs not covered by Medicare. But there are costs associated with auto crashes not covered by either Medicare or our health insurance. Here is a chart provided by the Coalition Protecting Auto No-Fault that might be helpful in deciding how much auto insurance you want to buy next year:
COMPARISON OF UNLIMITED PIP COVERAGE AND MEDICARE COVERAGE
COVERAGE CATEGORY |
AUTO NO-FAULT (Unlimited Coverage) |
MEDICARE* |
Post-Acute Care/Subacute Rehabilitation |
Yes - 100% as long as needed |
Limited - 100 days at 80% |
Long-term Care/Custodial Care |
Yes - 24/7 if needed |
Not covered |
Residential Treatment Programs |
Yes |
Not covered |
Case Management Service |
Yes |
Not covered |
Attendant Care (assistance with care, supervision, and cueing) |
Yes - 24/7 as long as needed |
Limited (Home Health Aide services 2 – 3 times weekly for 4 hours during acute recovery only) |
Guardianship or Conservators |
Yes |
Not covered |
Transportation Services (to and from medical appointments) |
Yes |
Not covered |
Replacement Services (homemaker services, personal care, meal assistance etc.) |
Yes - Up to 3 years $20/day |
Not covered |
Physical, Speech and other Outpatient Therapies (Patients with severe brain and spinal cord injuries may need therapies for months or even years) |
Yes |
Limited Will cover 80% and capped at $2010/year combined* |
Occupational Therapy |
Yes |
Limited - Will cover 80% and capped at $2010/year* |
Durable Medical Equipment (walkers, wheelchairs etc.) |
Yes |
Limited - Will cover 80% |
Massage Therapy |
Yes |
Not covered |
Home Modifications to ensure accessibility |
Yes |
Limited |
Vehicle Modifications (accommodate wheel chairs, hand controls, etc.) |
Yes |
Not covered |
Alternative Pain Management (such as acupuncture) |
Yes |
Not covered |
Specialty Assistive Devices (computers, assistive electronics, communication devices, fitness equipment) |
Yes |
Limited |
Wage Loss – if senior is still working |
Yes - up to 3 years |
Not covered |
Other considerations:
- Care options may be limited since not all specialists participate with Medicare
- Seniors are more likely to have previous medical conditions such as Parkinson’s Disease, stroke, osteoporosis, diabetes, arthritis and heart disease that may complicate and lengthen the recovery process from an auto accident.
*2018 limits according to Medicare.gov
GERRYMANDERING UPDATE
On June 27 the U.S. Supreme Court in a 5-4 decision held that partisan gerrymandering is not unconstitutional under the U.S. Constitution and that lawsuits challenging partisan gerrymandering are a political issue best left to states to decide.
A federal district court in Detroit had earlier ruled in a lawsuit brought by the Michigan League of Women Voters that the GOP-led Michigan legislature in 2011 had adopted partisan-biased political boundaries. That case is effectively finished.
However, the voter-adopted Proposal 2 to establish an independent citizen redistricting commission in Michigan’s Constitution was not affected by the USSC decision. Secretary of State Jocelyn Benson issued a statement saying “With clarity from the courts we will move forward to implement the Independent Citizens Redistricting Commission for the 2022 elections and actively engage all of our citizens in a transparent process that leads to fair districts for all.”
SHORT TAKES
Line 5 — On June 27, Michigan Attorney General Dana Nessel filed suit to shut down and permanently decommission Enbridge Line 5 in the Straits of Mackinac, explaining that Enbridge’s “continued operation of the Straits Pipelines present an extraordinary, unreasonable threat to public rights because of the very real risk of further anchor strikes, the inherent risks of pipeline operations, and the foreseeable, catastrophic effects if an oil spill occurs in the Straits.”
Pot rules — The licensed adult-use marijuana system will officially open on November 1 when the state’s Marijuana Regulatory Agency plans to start accepting applications for licenses. Emergency rules for the recreational pot market were released July 3. The first adult-use sales could possibly occur by the first quarter of 2020. More than 500 Michigan communities have opted out of allowing recreational marijuana establishments.
Snyder and Harvard — Former Governor Rick Snyder first accepted, and then declined, a senior research fellow position with the Harvard University Kennedy School’s Taubman Center for State and Local Government. After the appointment announcement, a firestorm of criticism erupted on social media about his role in the Flint water contamination crisis, prompting his decision to withdraw.
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.
Michigan SERA Recent News, a compilation of links to articles of interest to state employees, has been suspended until further notice.
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