Legislatvie Report December 2016

It’s over.  The 2015-16 Legislative session has come to a close after a brief but eventful Lame Duck session.  For MAGE members, it turned out to be one of the quieter Lame Duck sessions in memory.  Despite a strong push over the past year to pass civil service reforms, make changes to pension laws, and further privatize state governmental functions, for the most part those issues faded away as the 2015-16 Legislative session came to a close.  However, with 43 new House members taking office next year, the upcoming session beginning in January will certainly see many of these same issues resurface.
 
Anti-Public Employee Collective Bargaining Bills Die in House
 
A pair of bills aimed at prohibiting the use of union-leave time for public employees died on the House floor as the last day of session came to an end this week.  Senate Bill 280, sponsored by Senator Marty Knollenberg (R-Troy), sought to prohibit public employers from allowing union leave-time language in a collective bargaining contract.  This would have been devastating not only for union officials who would be barred from employer-paid leave time, but also for public employers who would lose the flexibility of having a paid union representative to perform day-to-day human resources tasks.  Also in the package was Senate Bill 279, which would have prevented school employees from receiving pension credits while on union leave time. 
 
The bills passed the Senate over a year ago but lay dormant in the House Commerce Committee until early December when it was suddenly placed on the agenda.  The committee moved the bills to the floor on a party-line vote, and it looked as if they would eventually pass.  However, a massive effort from a variety of public sector unions, joined often by management, was able to turn the tide over the last week of session.  Despite heavy lobbying by Senator Knollenberg, we were able to grow opposition to the bills in the House Republican Caucus to the point where they could not pass.
 
Other bills aimed at targeting union activities and benefits also died, including legislation to curtail picketing and demonstrations, close the public school pension system, and reduce retiree health care benefits for local government retirees. 
 
Pension Reforms Fizzle in Lame Duck – But will Return Next Year
 
One of the major policy issues that Senate Majority Leader Arlen Meekhof (R-Olive Twp.) and Speaker of the House Kevin Cotter (R-Mt. Pleasant) both had hoped to tackle in Lame Duck was public pension reform.  While the Senate focused on closing the Michigan Public School Employee Pension System (MPSERS), the House targeted local municipal pension plans – specifically retiree health care costs.  It seemed to be certain in early November that some package of legislation would surface and move quickly through the two chambers in the Lame Duck session.  However, backlash from public employees, and in some cases even from within the Snyder administration, served to bring these efforts to a halt.
 
The House introduced a package of bills that would have forced many local units of government to immediately cut retiree health care benefits to their employees – even for those who had already retired.  Proponents of the
measures argued that they were making tough choices in the face of massive unfunded liabilities for retiree health care costs.  However, local government workers (especially police and fire fighters who were affected the most) pushed back hard against the legislation.  At the very least, they argued, such sweeping changes should not take place in the wee hours of the Lame Duck session.   The House agreed to drop the reforms for now, but Governor Snyder and legislative leaders plan to make public employee retiree health care benefits one of the first items to be tackled next year.
 
State employees have already felt the pain of “pension reform” when the Michigan State Employees Retirement System (MSERS) was closed to new hires in 1997.  State workers hired since that time lost out on the opportunity for a traditional defined benefit pension, and instead have been offered a 401(k)-style defined contribution plan.  Therefore, the push by some in the Legislature to close traditional pensions around the state would not impact state workers (having already lost that battle nearly 20 years ago).  However, efforts to make cuts to retiree health care funding for local units of government could certainly spread to state employees – even those who are nearing retirement or who have already retired. 
 
School employees, on the other hand, find themselves under the same gun that state workers faced in 1996.  Back then, it was Governor John Engler pushing hard to close both the state employee and school employee pension systems.  Thanks to a lucky break involving a court case concerning special education funding, school employees avoided the fate that befell state workers.  Today, a cadre of State Senators are determined to reverse that. 
 
While that effort does not directly impact state workers, data that has come to light during the discussions show just what a cautionary tale the closing of the state employee pension system should be.  First of all, while the new 401(k)-style plan was promised to be just as secure and generous as the old plan, studies by the National Institute for Retirement Security show that a large proportion of Michigan state workers in the new defined contribution system are on their way toward falling well short of the necessary savings needed for a secure retirement.  The study found that for those nearing retirement age, the average amount in their retirement account was only $123,000 – a number that equates to a monthly benefit of less than $900.  Overall, the retirement income on average for those in the new system will be approximately one-third less than a similar employee in the old system.  The promise of greater portability for a similar benefit has certainly not come true for Michigan state employees hired after 1997.
 
Also troubling is the fact that MSERS was over 100% funded when it was closed in 1997.  Today, however, it is less than 70% funded and several billion dollars in debt.  Shrinking the base of new employees combined with the same economic downturns that have harmed the vast majority of defined benefit plans have served to devastate the fund’s balance.  However, at least the defined benefit plans have a chance to recover without crippling the retirement security of their members.  For many state workers who retired in 2009 or 2010 – at the height of the Great Recession – there is no coming back from the losses their 401(k)-style plans incurred. 
 
Next year the Michigan Legislature will focus on public employee retirement at the state, school and local levels of public employment.  State workers have good reason to be wary of attacks on their own retiree health care benefits, and to be concerned that the pain they have felt since their own pensions were taken away in 1997 will soon be visited on other workers around the state.
 
Legislation Passes to Create New Veterans’ Home Authority
 
A package of bills creating the Michigan’s Veterans’ Facility Authority Act was one of the last items the Legislature passed before adjourning for the year.  Senate Bills 1097-1100, sponsored by Senators McGregor (R-Rockford), Hildenbrand (R-Lowell) and Stamas (R-Midland), will create an Authority within the Department of Military and Veterans Affairs to independently manage state-operated veteran’s facilities.  The legislation stemmed from a highly negative report from the Michigan Auditor General citing numerous critical issues at the Grand Rapids Veterans’ Home.  One of the Authority’s tasks will be developing and implementing a plan to construct new veterans’ homes in Michigan.  They will use recommendations of the Michigan’s Veterans Workgroup that advised for the construction of at least 2 new homes (one in Grand Rapids replacing the existing facility, and a new one in Detroit). 
 
The makeup of the new Authority Board would be as follows:
 
The DMVA Director;   Three members appointed by the Governor with the advice and consent of the Senate,who represented the interests of one or more congressionally chartered veterans'
organizations;   Three members, including a resident of the Upper Peninsula, appointed by the Governorwith the advice and consent of the Senate;  One member appointed by the Governor from a list of two or more individuals selected bythe Senate Majority Leader;  One member appointed by the Governor from a list of two or more individuals selected bythe Speaker of the House of Representatives.
 
The Legislation became somewhat controversial when some legislators indicated their preference for further privatization of the system.  Representatives from labor organizations like AFSCME Council 25 pushed back, claiming that the bulk of the issues in the Grand Rapids facility had begun after the staffing there was contracted out to a private vendor.  A compromise amendment was added to the final legislation requiring any future staffing issues to comply with Civil Service rules and receive the approval of the Civil Service Commission.
 
Looking Ahead to Next Session
 
While the current legislative session is over, the 2017-18 session will likely continue many of the battles that occurred over the last two years.  The results of the 2016 election will have a House of Representatives next year that is identical in partisan makeup if not actual membership.  There will be over 40 new members of the Michigan House of Representatives being sworn in next month, but the Republicans will retain a 63-47 majority.  The new Speaker of the House will be Representative Tom Leonard (R-DeWitt), with the Democratic Minority Leader being Representative Sam Singh (D-East Lansing).  The Senate makeup is unchanged save for the induction of Senator Ian Conyers (D-Detroit) who was sworn in to replace Senator Virgil Smith, III who resigned earlier this year. 
 
Early priorities from House and Senate leaders, in addition to public pension reforms, include changing economic development laws to allow developers to capture tax revenues, making major changes to Michigan’s No-Fault Insurance law (a perennial favorite), and criminal justice reforms aimed at reducing Michigan’s prison population.