Capitol News
April 6, 2025
SCRAP THE CAP UPDATE
SERA has received the 16-page data-intensive Actuarial Study of proposed improvements in the 3 percent or $300 cap on the annual cost-of-living adjustments (COLA) for defined benefit (DB) State retirees and beneficiaries. The cap was adopted in 1987 and has never changed in the 38 years since. Inflation has been 176.1 percent since that time and over 85 percent of DB State employee retirees are at the $300 cap.
According to a retired economist for the State who looked at the study, the average state DB retiree could see a change in their projected 2026 annual COLA to an amount between $400 and $738, depending on which option lawmakers timely adopt for inclusion in the current Fiscal Year 2026 budget.
Background – Recall that Public Act 121 of 2024, the Fiscal Year 24-25 General Omnibus Appropriations law sponsored by State Senator Sarah Anthony (D-Lansing), contained a provision providing for an actuarial study of three options:
- Replacement of the current 3% or $300 cap with a cost-of-living adjustment based on the Consumer Price Index for Americans 62 years of age or older.
- Replacement of the $300 cap with $808 adjusted annually according to the Consumer Price Index for Americans 62 years of age or older.
- Replacement of the 3% or $300 cap with a 4% or $400 cap.
Caveats for the study included:
- That the proposed COLA changes begin prospectively.
- That the COLAs made to a retiree's compensation after retirement and before the prospective change remain unchanged.
- That the proposed COLA changes are applied to the retiree's base pension amount excluding previous COLAs.
- The actuary must include in the study an estimate of the number of individuals impacted under each proposal.
- The actuary must include in the study an analysis of a 30-year projection of costs to the State to implement the proposals described in subsection.
- The inflation factor built into Option 1 and 2 defy accurate projection. The study used 2.45 percent.
The study was based on workforce and retiree data of September 30, 2023, the latest available for the study.
| Retirees and beneficiaries currently receiving benefits | 59,614 |
| Current active employees in the DB plan | 3,812 |
| Inactive DB members not yet receiving benefits | 1,871 |
| Total DB participants | 65,297 |
If previous COLAs are considered in the base amount from which calculations are made, in FY 2026 State revenues to pay for the improvement would be the following:
| Option | First-year cost change | Unfunded Actuarial Accrued Liability change | Change in Amortization Payment | Total FY 26 Employer Contribution needed |
| 1 | $5,811,876 | $2,187,739,295 | $517,553,719 | $523,365,595 |
| 2 | $6,647,434 | $2,380,900,580 | $578,555,156 | $585,202,590 |
| 3 | $1,722,864 | $625,600,020 | $157,690,786 | $159,413,650 |
SERA representatives will be meeting with the Office of Retirement Services and others to understand better all the provisions and implications in the study. If a way forward is seen, a bill to change the State Employee Retirement Act would need to be created and introduced, and the appropriation bill for FY 2026 would need to include the necessary dollars to fund it.
LEGISLATIVE AND OTHER NEWS
One or both chambers have been on two-week spring vacations in late March and early April.
Grandparent Inclusion — A bill SERA supported in Committee to include grandparents in the definition of those to whom a residential transfer of ownership without uncapping the taxable value of the residence after transfer passed the Michigan House 97-11 on March 18. This will save grandparents a huge property tax bill in many cases if it becomes law.
Virtual Tax Tribunal Hearings — The Michigan House also passed two bills SERA supported in committee to allow virtual Tax Tribunal hearings, saving taxpayers the cost of transportation. The bills are House Bills (HBs) 4098 and 4099 and passed 100-8 and 98-10 respectively.
Nine Hostage Bills Update — The legal drama continues concerning the nine bills passed in both chambers in December 2024 that the new Republican Speaker of the Michigan House refused to present to the Governor in January 2025. SERA supported four of the bills including HB 6058 of 2024 to make 80 percent the floor rather than the ceiling for public employers to pay for public employee health care premiums. The State Employees Retirement Act requires State retiree health care premiums to be the same as active State employee premiums, so non-Medicare eligible State employee retirees could benefit by this change if the bill became law. HBs 4645 – 4667 of 2024 to allow State corrections, conservation officers, and some others to participate in the State police retirement plan, a hybrid plan with both pension and 401k components, was also among the bills in limbo.
The Michigan Senate filed a lawsuit to compel the current Republican House Clerk and Speaker to present the bills to the Governor. Court of Claims Judge Sima Patel issued a mixed opinion and order supporting the Senate’s position but failed to order the House to present the bills. On March 12, the House passed by voice vote House Resolution 41 directing the Clerk of the House to only present to the Governor enrolled House bills finally passed by both chambers of the Legislature during this legislative session. On March 18, the Michigan Senate appealed the Patel decision to the Court of Appeals and applied for bypass of the Court of Appeals to the Michigan Supreme Court. House Resolution 48 was introduced March 19, directing the Clerk of the House to promptly present to the Governor the disputed nine bills. The Resolution was sent to the House Government Operations Committee, where it will likely die. On April 3, the high court denied the Senate’s bypass request but urged the Court of Appeals to hear the case on an expedited basis.
Vulnerable Adult PPO Bills — Senate Bill (SB) 111 to give vulnerable adults 60 and over, as well as adults unable to live independently due to developmental, mental or physical disabilities, access to special restraining order provisions to prevent elder abuse ran into some opposition by gun rights activists during a lively and extended committee hearing on March 18. Despite the opposition, the Senate Civil Rights, Judiciary and Public Safety Committee voted to approve SB 111 along party lines. The Committee also advanced SBs 112 - 114 unanimously for full Senate consideration. SB 112 expands the definition of a “racketeering” violation, covering the use of fraud, deceit, misrepresentation and coercion to try taking a vulnerable adult's property or money. SB 113 clarifies that stealing from a vulnerable adult can still be prosecuted whether the acts took place before or after their death. Additionally, SB 114 allows counties and regions to develop a “vulnerable adult multidisciplinary team” to investigate and raise awareness of exploitation, abuse, and neglect.
Income Tax Rollback – The House passed legislation to reduce the individual income tax rate from 4.25 percent back to 4.05 percent. HB 4170 would reduce the rate and ensure any reduction in the income tax set in motion under a 2015 trigger law is permanent, not just one year as the Attorney General advised. The bill passed 65-45, with three Democrats joining the majority.
Road Plan – The House passed a nine-bill package on March 19 to provide $3.1 billion for a long-term road funding plan. The bills in the plan include HBs 4180 – 4187 and HB 4230. The plan redirects $2.2 billion from the Corporate Income Tax to road funding, including over $1 billion currently earmarked for corporate incentives and housing. It ends sales tax on fuel, raising the fuel tax instead, with a revenue-neutral impact on drivers but adding $1 billion for roads. The plan adjusts the Michigan Business Tax, removes Michigan Economic Growth Authority credits, and reduces economic development grant funding by $500 million to balance losses. It also allocates $750 million to the School Aid Fund and $95 million to local revenue sharing, while maintaining $50 million for the Housing and Community Development Fund. This leaves $850 million unaccounted for.
Voter Registration Restriction Ballot Proposal – The Board of State Canvassers will consider on April 18 summary language describing a proposed Michigan election law. The proposed 100-word summary is the following:
Constitutional amendment to: require individuals to verify United States citizenship during voter registration; require photo ID for in-person voters; allow voters without photo ID or citizenship verification to vote by presenting ID or verifying citizenship within 6 days after election; provide free photo ID and proof of citizenship to hardship applicants; require driver's license, state-ID, partial social security numbers, or photo ID when applying for and voting by absentee ballot; require secretary of state to verify citizenship during voter registration, verify citizenship of registered voters, remove individuals from voter rolls that fail to verify citizenship, and report annually on citizenship verifications.
A review comparing the voting file with the driver’s license file issued April 3 by Michigan Secretary of State Joselyn Benson found that 16 non-citizens voted in the November 2024 election. Thirteen have been referred to the Attorney General for potential criminal charges. One of the 16 has died. The other self-reported before election day but too late to retrieve his ballot. That case is under investigation. The Department of State's review emphasized that the 16 cases represent just 0.00028 percent of the more than 5.7 million votes cast in Michigan in November. The cases appear scattered and isolated with no concentration in any one county or municipality. Secretary of State Benson is opposed to proof-of-citizenship requirements beyond what is in current law.
Bottle Deposit Expansion? – The Michigan Environmental Council is seeking a campaign manager to run a November 2026 campaign revamping Michigan's “Bottle Bill,” which currently requires a 10-cent deposit on most carbonated beverages, such as beer, Coke, and other soft drinks. The tentative plan would expand the 10-cent deposit to water, sports drinks, and more. “Universal redemption” is also part of this plan, meaning any store that sells beverages would need to give the customer a dime back for the container as opposed to returning it to the store where the purchase was made.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Coordinating Council’s Legislative Representative. She may be contacted at michigansera@comcast.net.
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