Earlier this year, the Governor’s Task Force on Responsible Retirement Reform for Local Government adopted recommendations calling for greater transparency and oversight of the hundreds of individual pension plans offered by local governments in Michigan.
Last week, however, bills introduced in the House and Senate on November 30 (SB 686-701 and HB 5298-5313) go far beyond what the Task Force recommended.
We do not need a “one-size-fits-all” approach to local retirement and healthcare benefits. Unfortunately, the bills as introduced create broad mandates that restrict home rule, jeopardize health care benefits for retirees who have relied on them for years, and create a mechanism where decisions that affect thousands of municipal employees could be made by a trio named by the Governor.
The Email below was sent to all Legislators on 12/6/17 voicing our concerns with this legislation:
TO THE MEMBERS OF THE MICHIGAN LEGISLATURE:
SEIU 517M opposes Senate Bills 686-701 and House Bills 5298-5313. As introduced, this legislation could cost thousands of current retirees’ health care benefits. It also undermines local units of governments who have worked for years to provide benefits to the workforce that has served their communities by providing police and fire protection and other city services like waste water treatment, road maintenance, library, court and mental health services. They have worked together to maintain benefits for current and future retirees at an affordable cost for their community and their employees and retirees.
While SEIU 517M recognizes the need for reform in funding municipal retirement plans we believe the collaborative approach recommended by the Task Force is reasoned and thoughtful. It allows for local solutions that recognize local needs. It doesn’t undermine the ability of local units to attract and retain a qualified work force needed to deliver essential services. It doesn’t force failed or unproven “solutions” to complex and difficult problems on communities in Michigan. AND it doesn’t risk the health and safety of those communities by transferring control to unelected, unaccountable state appointees.
The bills before you take drastic action far beyond the Responsible Retirement Reform for Government Task Force recommendations the most serious of which are outlined below:
- Allows local units of government to reduce or eliminate health care for any retiree if that former employee was not covered by a collective bargaining agreement that expressly provided for lifetime benefits without consultation or notice. This applies to most union retirees and ALL non-union retirees.
- Requires the elimination of all health care benefits for former employees who take a new job that OFFERS health care coverage regardless of the cost.
- Prohibits local units of government from even considering reopening closed pension plans.
- The Municipal Stability Board, now named a “Financial Management Team” would be comprised of just three gubernatorial appointees only one of whom needs to be a resident of the community.
- This “Team” would have Emergency Management like powers forcing local units of government to take actions against their will in matters including retirement benefit issues. If the local unit, its unions, retirees or contractors did not fully comply an Emergency Manager would be created.
While those points listed above are the most extreme and egregious provisions there are many other provisions included in the legislation that go beyond the consensus recommendations.
- The package allows all health care plans, whether for people who have been retired recently or for decades, to be reduced or eliminated in almost every situation. It interprets past collective bargaining agreements without consideration of the full intent of the parties. If an employee retired without a collective bargaining agreement, retiree health care becomes optional with the employer at any time, for any reason, without consultation and without notice. Contrary to representations of proponents this is NOT a “stage 5” provision but impacts ALL local municipalities which offer retiree health care.
- Even though two states have found ways to save money by reopening defined benefits plans for the employer while providing more secure retirement, this package insists that option cannot be considered. Currently no communities are considering such a move but taking it out of consideration means (1) an option that might prove beneficial is prohibited and (2) decisions to close open pension systems would become irrevocable.
- Rather than allowing coordination of health care benefits with available employer paid benefits, the package simply eliminates health care coverage to any retiree who takes on new work for supplemental income that offers “comparable” health care benefits, leaving the term “comparable” to the sole discretion of the local municipality.
- The declaration of a fiscal emergency by the State Treasurer under PA 436 suspends the duty of employers to bargain in good faith with a recognized collective bargaining agent for a minimum of 5 years on ALL local municipal issues by operation of language in PA 436. It is not clear that this was the intention of the drafters but as written raises the possibility of a package that both requires collective bargaining while simultaneously prohibiting it.
- Other than county sheriffs, the proposal prohibits a local municipality from offering a pension to any appointed or elected official who has not previously been a member of its plan. This will make attracting qualified applicants to important appointed positions nearly impossible.
- Amortization periods are severely limited imposing unnecessary, major costs on local municipalities.
- Reopening or entering new defined benefit health care plans are prohibited.
- Local Government Stability Teams are exempted from the Freedom of Information Act eliminating transparency in the operation of local municipal governance.
- “Negotiation” with local employees and retirees is €. Many local municipal employees are not organized and there is no legal method of creating a bargaining representative for retirees (retirees are not represented by collective bargaining agents under PERA.)
- The proposal greatly expands the original jurisdiction of the Court of Claims and strictly limits challenges to state actions in a manner that raises questions of violation of the concept of separation of powers.
- The proposal overrides charter provisions, local resolutions, local ordinances and limits future collective bargaining agreements.
- Appropriations are included to restrict the constitutional right of referendum.
- The State, while exercising the right to completely control local municipal finances, disavows any obligation to be involved in the funding of those operations either directly or through loans.
- A “financial management team” decisions are “binding on the municipal government and its officers, employees, agents, and contractors” raising concerns about the possibility of attempted unconstitutional impairment of contracts.
- Amends the Public employee retirement system investment act to eliminate actuarial studies for any changes in benefits that do not “increase” benefits. That creates problems particularly where the cost impact of a change may not be certain.
- Bonding is prohibited.
While not the only factor a huge contributing factor for local governments is the significant loss of revenue sharing over the last 25+ years that proponents of this legislation indicate “we are trying to find solutions, not place blame” but never address the issue of lost revenue on local governments or a willingness to provide helpful future funding options for local governments to use to eliminate State concerns on this issue.
SEIU 517M and our almost 2,000 current local government members and thousands of retirees oppose this legislation because it goes beyond what is reasonably necessary to fix the problem and potentially jeopardizes the health and livelihood of those who faithfully serve(d) their community and the taxpayers of Michigan. We ask you to implement the recommendations of the Task Force and oppose anything that goes beyond the Task Force agreement.
Liza Estlund Olson, Executive Director
SEIU Local 517M
George Heath, President
SEIU Local 517M