Article as originally seen on the Detroit Free Press.
Gov. Rick Snyder has signed major changes to retirement benefits for new teachers into law, another contentious battle is on the horizon for the fall when legislators hope to extend those changes to other public employees.
Those affected would include police officers and firefighters, as well as other municipal employees.
The Legislature faced a furious backlash from police officers and firefighters last year when it began to discuss cuts to retiree health care and other retirement benefits for municipal employees during the lame duck session. Lawmakers backed off the proposal, and will likely face a similar battle if the issue is resurrected.
“You’re going to see the quality of officers to continue to be greatly diminished and you’ll have greater difficulty in recruiting quality people for the job,” said Ed Jacques, director of member services for the Police Officers Association of Michigan. “They ought to be looking harder at funding that will attract the most quality people for the most important job that municipalities have, which is public safety.”
One of the problems for law enforcement is that many retire earlier than age 65 because of the physical demands of the job, increasing the need for good retirement benefits.
“There are not many people who can push a squad car around for more than 25 years,” Jacques said. “Do you want a 64-year-old police veteran on a call? You can’t argue with the experience, but if there’s a physical thing that needs to be done, they might not be able to do it.”
Even with the expected backlash, Senate Majority Leader Arlan Meekhof, R-West Olive, said his top priority for the fall session of the Legislature will be changes to retirement benefits for more public employees of cities, villages, townships and counties.
There also has been talk of forcing all communities to switch employees from a pension type of retirement system to a 401(k) defined contribution plan. Many communities have already done that, but there are some that still have pension systems. The state switched new employees from a pension to a 401(k) plan in 1998.
“We’ve got to figure out if we can give locals better tools to manage that, so they’re not saddled with expenses they can’t afford,” Meekhof said. The folks who rely on retirement benefits “have got to know that if a municipality goes bankrupt, they are likely to not have any of those things.”
Gideon D’Assandro, spokesman for Speaker of the House Tom Leonard, R-DeWitt, said it’s also an issue the House wants to tackle in the fall after a report from a Snyder-appointed task force on retirement benefits is issued later this summer.
“We’re going to look at the recommendations that come out and see what we can put together,” he said.
Lawmakers are borrowing from the playbook of groups such as the West Michigan Policy Forum, an influential organization of corporate leaders pushing business-friendly policies, including right to work policies and consolidating local governments. The group listed its top priority of 2016 as changing public employees’ retirement benefits, including getting rid of pensions and downsizing retiree health care benefits.
In applauding the Legislature and Snyder for enacting the teacher pension legislation, which the governor signed on Thursday, the group said that “reforming Michigan’s unfunded liabilities will continue to be a top priority as other public pensions and retiree healthcare benefits are addressed.”
Last year in Lansing, that translated into eliminating retiree health benefits for all new employees and replacing them with a contribution of up to 2% of an employee’s pay into a health savings account. As a result, droves of police and firefighters descended on the Capitol to protest the proposal and they’re ready to do it again.
Mark Docherty, president of the Michigan Professional Fire Fighters Union, said a one-size-fits-all mandate from the state will hurt communities and their employees.
“This is a local control issue. There are plenty of cities that aren’t having any problems with pensions or retiree health care,” he said. “We know through bargaining that communities are dealing with this on a local level. They determine what’s right for them and what works for them. And for the Legislature to say they’re gong to fix the problem from a state level, that’s going to harm a lot of other communities.”
Chris Hackbarth, director of state affairs for the Michigan Municipal League, said while many municipal pension systems are in a stronger position than even the state’s remaining pension obligations, the single largest spiraling cost for cities is retiree health care and something needs to be done about it.
“We need good employees because you want someone who is running something like a water system who is highly competent. So you need to offer good pay and benefits,” he said. “But you have to balance that with the reduction in services that have to happen because you’re spending so much on legacy costs.”
The talk of changes to even more public employee retirement benefits comes as Snyder signed controversial legislation to make major changes to the teacher retirement system in order to address a $29.1 billion unfunded liability in the teacher retirement system.
“Modernizing the school employee retirement system means these benefits will be there for retired school employees in the long term, while at the same time protecting taxpayers from escalating liabilities,” Snyder said.
All new teachers and school employees hired after Feb. 1, 2018, would automatically be placed into a defined contribution retirement plan. The plan would have the school district pay 4% of the employee’s salary into a 401(k) plan. The employee could also contribute and the state would match up to 3% of the employee’s contribution.
The state would close the current hybrid system that is a combination of pension and 401(k) and replace it with a new system that would be more costly for the employee. It would be closed by the state if it wasn’t at least 85% funded for two years in a row. The goal of the plan is to make the 401(k) plan so attractive that new employees will automatically want to get into it, instead of a hybrid pension plan.
“Smart, corrective action was required to address a school employee pension system that has an unfunded liability of nearly $30 billion,” said Sen. Phil Pavlov, R-St. Clair, who sponsored the legislation. “This is a sustainable and affordable solution that provides new teachers with a modern retirement that mirrors plans offered to state employees and legislators.”
Article as originally seen on the Detroit Free Press.