School and Local Government
Senate Passes SB 1040 – School Pensions to Cost the State More!
From the Coalition For A Secure Retirement:
Broken Promises: Michigan Lawmakers Pass Pension-Slashing Legislation with Higher Price Tag than Current Plan
Lansing, MI – On May 17, 2012, the Michigan State Senate passed pension-slashing legislation, Senate Bill 1040, that would undermine the retirement benefits of school employees and cost the state an additional $2-3 billion more than its current plan, according to the Michigan Office of Retirement Services. The bill’s expensive price tag stems from a defined-contribution amendment that would switch the retirement plans of public school employees hired after Jan. 1, 2013 to a sole defined-contribution plan.
In its report, the Office of Retirement Services concluded that the defined-contribution amendment carried a heavier price tag than the state’s current Hybrid retirement plan for school employees. Up-front costs of switching employees to defined-contribution would total $402 million in the first year alone, in addition to the one-time administrative price tag of $8-10 million. What makes the legislation more puzzling is that the costs of the defined contribution plan are higher than the existing Hybrid plan, meaning that as more school employees are enrolled, the costs to the system will increase – the exact opposite outcome from what the initial bill aimed for.
Moreover, SB 1040 would further shift pension and retiree costs onto the backs of active and retired school employees, and concurrently deliver a severe blow to the retirement benefits for future school employees.
“It is ironic that the state lawmakers, justifying their pension overhaul by lamenting budgetary burdens, passed a bill that will actually cost Michigan more than its newly enacted Hybrid plan,” said Gary Olson of Public Sector Consultants. “However, the real travesty is that the legislation undermines retirement security for future school employees. The consequences of these costs stemming from SB 1040 will include increased employer contributions, diminishing retirement benefits for future school employees, and higher state costs that will be paid for by taxpayers.”
The Coalition for Secure Retirement have called upon the politicians in Lansing to back off from the benefit cuts they are pushing and instead focus on solutions that will solve the structural problems in the public school pension system.
“This plan makes no sense. SB 1040 creates a ticking time bomb for Michigan school districts and community colleges. It ignores the real steps towards addressing the Michigan Public School Employee Retirement System (MPSERS) unfunded liability,” said CSR president John Olekszyk. “The Michigan Senate may have started out with an eye towards reducing pension costs for our schools, but today they just made the problem worse.”
Regions 1 and 2 Ballot
Position: SEIU Local 517M Secretary/Treasurer
John Eck
DIVISION: State Employee Division—Technical Bargaining Unit
EMPLOYER: State of Michigan—Department of Transportation—28 Years
JOB CLASSIFICATION: Construction Technician
SEIU Local 517M and other relevant experience: Steward, Technical Unit Officer & Board Member, SEIU State Council Trustee, SEIU Convention Delegate, SEIU 517M Secretary/Treasurer.
Andy Johnson
DIVISION: School & Local Government Division—Region 1
EMPLOYER: City of Saginaw—28 Years
JOB CLASSIFICATION: Remote Facilities Person II
SEIU Local 517M and other relevant experience: Served in various leadership capacities with SEIU, Current 517M Secretary/Treasurer, President of the Saginaw Municipal Employees Chapter of SEIU 517M, Region 1 Board member, 517M Executive Board member, President of SEIU 517M AFRAM (affiliate of the National African American Caucus of SEIU), President of the Central Region AFRAM Caucus providing leadership for six states of AFRAM caucuses.
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Vote Now |
The following candidates ran unopposed for their respective positions. They will be certified as the winner of their election by the Election/Tally Committee.
SEIU Local 517M President – Bill Ruhf
Region 1
Divisional Vice President – Betty Nash
Secretary – Leticia Trevino
Saginaw City Schools – Cheryl Merrill, Jeanette Barnett, Roberta Oldenburg
SCCMHA – Ernie Ahmad, Valerie Toney
Buena Vista Schools – Brenda Moore
Saginaw ISD – Lashonda McGill, Sharone Harris
New Passages – Cheri Whitson, Elizabeth Merz, Jason Little
Combined at large – Kimberly Dukarski, Michael Hensler
Region 2
Divisional Vice President – Ray Clover
Vice President / Secretary – Dave Levett
Recording Secretary – Jan Goodwin
Chapter 1 – Renee Wines
Chapter 2 – Eric Campbell
Chapter 3 – Lori Haan
Federal suit filed against unconstitutional ban on payroll deduction of dues
Unions band together to fight bias, retribution of Public Act 53
DETROIT, April 4, 2012 – Four unions representing Michigan school employees filed suit today in Michigan’s Eastern District federal court challenging the constitutionality of Public Act 53 of 2012, the recently enacted ban on payroll deduction of dues for public school employees only.
The suit asserts that the law violates the First and 14th Amendments of the U.S. Constitution, discriminating against school employees as retribution for political speech and treating school employees differently than other classifications of workers without reason. Last week in Wisconsin, another federal court found that similar restrictions on public workers passed during last year’s highly publicized assault on worker rights were unconstitutional.
Locals unions and members from MEA, AFT Michigan, AFSCME Council 25 and SEIU Local 517M are plaintiffs in the suit, which seeks injunctive and declaratory relief. The three Commissioners on the Michigan Employment Relations Commission are named as defendants, since they are the public officials responsible for enforcing PA 53.
“The day this bill passed the Legislature, we wrote to Gov. Snyder outlining the constitutional problems with this unfair law,” said AFT Michigan President David Hecker. “By signing this bill, he clearly ignored the fact that there is no rational reason for this to be law. The House Fiscal Agency says this won’t save money – in fact, it may cost some districts money to enact the change. It’s just another attack on collective bargaining rights for one group of Michigan workers. We were gratified that groups such as the Michigan Association of School Boards, the Michigan Association of School Administrators, and the Michigan Parent Teacher Association opposed this bill because they know payroll deduction works for everyone.”
PA 53 makes it illegal for school districts to bargain language allowing for employees’ dues to be paid to their union through payroll deduction – a practice that has been decided at local bargaining tables for decades in Michigan. Where a contract is in place, it allows for the continuation of the practice until the end of the contract. The bill only applies to K-12 public school employees. On Monday, an Ingham County Circuit judge issued a preliminary injunction on the implementation of this law due to a dispute over the House’s granting of “immediate effect” without a roll call vote.
“This is another in a long line of new laws passed by this Legislature and this Governor that undermine the rights of working people and citizens in this state,” said Al Garrett, President of Michigan AFSCME Council 25. “From the Emergency Manager law to budget cuts for schools and local communities to this latest hypocritical attack on hard working school employees, extreme politicians in Lansing continue to ignore the voices of their constituents. They’re using their elected offices to exact political revenge – it’s just plain wrong.”
When the Governor signed the bill, he said, “This legislation furthers the goal of good government by promoting greater transparency and ensuring that public resources are used solely for their intended purposes.” That explanation is hypocritical at best, however.
Following that logic, if this was about proper use of “public” funds, why is only one category of public workers – school employees – singled out? Why does this only apply to union dues and not other payroll deductions like United Way contributions, health insurance or pension contributions, or even taxes? All those things should be billed separately to workers under that logic. Why should taxpayer dollars be used by public entities to fund other private operations, like associations for cities, townships, school boards and more?
“The logic is flawed here because it’s a hollow attempt to cover up the true intent of this law,” said MEA President Steven Cook. “This bill sat for months in the Senate. It’s no coincidence that it passed within 24 hours of the launch of a worker coalition to amend our state constitution to protect collective bargaining rights. That just doesn’t pass the smell test. It is blatant retaliation against one group of workers who insist on standing up, making their voices heard and fighting back against the attacks on collective bargaining, public education and the middle class.”
Last Friday, a federal judge in Wisconsin ruled that the state could not enforce a ban on dues deduction that was part of Gov. Scott Walker’s controversial “budget repair bill.” The constitutional grounds for that decision are similar to those brought forward in this suit.
“Last year’s attacks on public workers in Wisconsin were the worst kind of partisan political power grabs and we’re thrilled for the workers in that state who’ve been vindicated through our federal justice system,” said Phil Thompson, Executive Vice President of SEIU Local 517M. “We’re proud to be taking Michigan’s version of those attacks to federal court in our state, where we are confident that truth and justice will win over politics and retribution.”
Press Coverage on School Retirement Legislation
Gongwer -March 22, 2012
M.P.S.E.R.S.: 8% Contribution For Most School Workers
Most current public school employees wanting to keep their pension benefits would have to contribute at least 5 percent and as much as 8 percent of their salary to the system under a massive restructuring bill introduced Thursday in the Senate.
Much anticipated, supporters of SB 1040 say it will address the $45 billion in unfunded liability in the system and reduce how much of the School Aid Fund has to go toward the Michigan Public School Employees Retirement System and instead free up that money long-term for actual K-12 instruction.
“This bends the cost curve down in the future billions of dollars,” said Sen. Phil Pavlov (R-St. Clair), a co-sponsor of the bill who was part of the group that drafted it. “Over time, these changes begin to amplify throughout the system and there’s massive savings going forward.”
The bill was sent to the Senate Appropriations Committee, which is expected to hold its first hearing on the bill next week.
There are three current plans in the MPSERS system. The newest one, enacted two years ago for new hires, would essentially see no changes. New hires would continue to go into that plan with a final average compensation cap of $100,000.
However, the basic system, which handles employees hired before 1990, and the Member Investment Program, which overall handles the vast majority of public school employees, would see major changes.
Those in the basic system currently make no contribution to the pension system. They would have to contribute 5 percent under the bill. Those in the MIP system contribute 3.9 percent currently. That would rise to 8 percent under the bill.
Employees could choose not to have to pay the added contribution, but then their pension multiplier would drop from 1.5 percent of final average compensation to 1.25 percent.
Employees also could decide to freeze their pension benefit at current levels and switch to a 401(k)-style plan where they would have no required contribution. The state would contribute an amount equal to 4 percent of the employee’s salary.
On the health care side, public school employees would continue making the contribution equal to 3 percent of their salary to fund retiree health care that was instituted in 2010. The Ingham Circuit Court has ruled the contribution unconstitutional, but an appeal has long been pending before the Court of Appeals.
But there would be additional changes. Retirees would now have to pay 20 percent of the cost of their health insurance premium, up from 10 percent.
And new hires would lose state-backed retiree health insurance. Instead, they would have 401(k)-type accounts where the state would contribute an amount equal to 2 percent of their salary. Employees could contribute up to 2 percent. Workers could then put those funds toward the cost of health care when they retire.
Most current employees also would have to wait until they were 60 to access retiree health care.
Some issues remain a work in progress. The bill does not address so-called stranded costs – how to address the issue of districts privatizing certain services, removing a source of contributions to the system, even as the level of benefits remains. And the bill does not address public universities, some of which are in the MPSERS system.
Sponsors of the bill said savings would be realized over the long-term.
“It took us forever to get into this situation,” said Sen. Roger Kahn (R-Saginaw Township). “It’ll take us damn near forever to get out of it.”
The Michigan Education Association is still reviewing the bill, but there are serious concerns, spokesperson Doug Pratt said.
For those in the MIP plan, which Mr. Pratt said houses the “vast majority” of those in MPSERS, they will now have to pay 11 percent of their salary toward retirement benefits when combining the 8 percent for pension and 3 percent for health care.
“That is a huge percent of salary for people who are not living high on the hog to begin with,” he said.
And doubling the contribution for current retirees from 10 percent to 20 percent of the insurance premium is a significant hit too, Mr. Pratt said.
“You add that to the new pension tax and you’re taking people who already are on a fixed income … and taking a huge bite out of their monthly budget. At what point is enough enough?” he said.
School Employee Retirement Targeted by Republicans
On Thursday, March 22nd, Senator Roger Kahn (R-Saginaw) introduced Senate Bill 1040. This bill makes massive changes to the Michigan School Employee Pension System (MPSERS) that greatly shifts costs for pensions and retirement health care benefits onto school employees and retirees. House and Senate leaders have expressed their desire to have the bill move through the process at lightning speed, getting the bill to the Governor’s desk by June.
Among other things, Senate Bill 1040 essentially eliminates all retirement health care benefits for future school employees, and requires current employees to pay a much greater share of for their retirement health care. It will also require existing employees who opt to remain in a defined benefit pension plan to increase their contribution rate to either 5% or 8% depending on whether they were currently members of the Basic System or the MIP system. Perhaps worst of all, it will greatly increase costs for those who are already retired by capping the state share of retirement health care premiums at 80%. A brief analysis below goes into more detail.
Sadly, this is only the latest in an ongoing string of legislative attacks on retirees that has resulted in fewer and fewer Michigan retirees being able to count on a secure retirement. Retirees in Michigan are having their pensions taxed for the first time as a result of legislation passed last year. State employee pensions were under the gun earlier this session, and after legislation that passed recently new state workers will find that they have no retirement health care benefits when they go to retire years down the road.
Now the Legislature has turned its eyes on school employees. Proponents of the bill claim that the current costs of school employee pensions are “siphoning money from the classroom.” First off, this discounts the fact that teachers and other school personnel are the most important parts of the classroom, and their pensions are part of their overall compensation. But more galling is the notion that the moment teachers are out of the schoolroom and retired, they no longer have any value and can be discarded. Moreover, the language used by some proponents of these bills promotes the image that school personnel are somehow taking money from children to pay for their retirement. This is outrageous, especially when it is all too common these days for teachers and school workers to dip into their own pocketbooks to pay for school supplies which their districts can no longer afford.
The Coalition for Secure Retirement, of which SEIU Local 517M is a charter member, is asking their members to please contact your State Senator and ask them to vote against this severe and onerous legislation.
Summary of Senate Bill 1040 – Retirement Reform
Pension Side:
- Allows current school employees not in the hybrid plan to choose one of the following going forward:
- An increased contribution rate (to 5% or 8% — see below), to retain the current multiplier of 1.5% for future years of service in the calculation of a pension.
- Same existing contributions, but a reduced multiplier for future years of service (used to calculate their pension; from the current 1.5% of final average compensation (FAC) to 1.25% of FAC).
- Freezing their benefits under the defined benefit system and going to defined contribution, with a 4% employer contribution to a 401k.
- Those in the basic system (hired before 1990, who did not choose to go into MIP) would pay 5% of salary if they choose the increased contributions to retain the existing 1.5% multiplier.
- Those who are in the MIP system (but not in the recently created hybrid system) would pay 8% of salary if they choose the increased contributions to retain existing 1.5% multiplier.
- Hybrid employees (those hired after July 1, 2010) remain in the hybrid plan at current contribution levels.
- Caps the salary amount that is used for calculating pension benefits for new employees at $100,000.
- Prohibits some types of compensation from counting toward calculating pension amounts going forward. Those types are: tax-sheltered annuities, longevity pay and merit pay.
Health Care Side:
- The system would pay no more than 80% of the retiree health care premium for those who have a premium subsidy (current retirees and current employees hired before July 1, 2012).
- Requires most current employees to be at least 60 years old before they can receive retiree health care benefits. However, there would be a phase-in period for current employees; up until June 30, 2013, those who are not yet 60 could qualify if their age and years of service add up to 85 by that date.
- Retroactively applies a graded premium retiree subsidy coverage for all employees. Under current law, only employees hired since July 1, 2008 are in graded retiree health care premium coverage, but this bill retroactively applies graded premiums to all employees.
- Creates a 2% retiree 401k account for new employees — they would have no retirement health care premium subsidy. Employees could contribute up to 2% of their salary to the account and have up to that amount matched. Note: since employers are presently paying for current retirees’ health care on a cash basis (meaning it is not pre-funded), this is actually an additional cost to employers for the next 30 years, but after that, health care costs will begin to decline significantly.
- Maintains the 3% employee contribution for health care for current employees only. (As described above, new employees would instead pay the 2% into the health reimbursement account.)
Legislature Taking Away School Members’ Voice
The Michigan Legislature has recently passed legislation that would restrict the voice of workers by not allowing the automatic deduction of their union dues. The SEIU Local 517M Executive Board discussed the issue at their March 9th meeting and is currently looking at the issue to ensure that the collective voice of the membership is preserved. More information will follow as this issue unfolds.
School Employees Retirement Lawsuit Still Unresolved
The Michigan Supreme Court has not ruled in the case of the 3 percent retirement contribution for school employees. The Court has ruled only in the case of SEIU Local 517M v. State Employees’ Retirement System (SC docket No. 143829), dealing with the state employee retirement contribution. The refund mentioned in that ruling ONLY APPLIES TO STATE EMPLOYEES.
There is a separate lawsuit filed on behalf of school employees since they are in a different retirement system and there are different arguments in the case. The final outcome of that litigation has not been determined. Until that happens, the 3% contribution will continue to be placed in an escrow account as per a lower court ruling.
We will keep you updated when final resolution of the matter has been determined.
Rally: Saginaw Kids Before Corporations
Tell Michigan politicians to protect Children, not CEO’s! Local families, activists and community leaders will be gathering on Tuesday, December 13th from 4 p.m. to 5 p.m. at the Saginaw County DHS/State Building (411 E. Genesee, Saginaw, MI 48605).
This rally and “roaming” display will draw attention to recent changes in Michigan placing Corporations and Banks ahead of our children. We Are The People – Saginaw is calling on Michigan politicians to support children and their families before big business and political donors. Children are affected both at home and school by cuts and reductions to programs like WIC, Cash Assistance, Head Start and early education, and K-12 funding. Children are our future, representing a great portion of the population who can’t simply “pull themselves up by their bootstraps.” Instead of giving $2 Billion in handouts to big corporations and banks, we need our leaders to stop the power struggles and focus on protecting kids, our most valuable assets.
Questions, comments, and concerns, please contact: Chad Young at cyoungssm@gmail.com, 989-751-7210, or Jim Moreno at santiago@winntel.net, 989-444-8015
Progress Michigan Calls on Legislature to Come Clean About Mackinac Center’s Influence
Progress Michigan has published the following press release:
Progress Michigan Calls on Legislature to Come Clean About Mackinac Center’s Influence
Lawmakers should honor transparency if group truly is not lobbying
Lansing – Progress Michigan called today on the state Legislature to release all emails and other communications between lawmakers and the Mackinac Center for Public Policy, including those of a lobbying nature, in light of the center’s admission that its goal is to “outlaw government collective bargaining in Michigan.”
“Right-wing politicians have long relied on the Mackinac Center for their talking points and warped data to prop up their anti-worker agenda,” said David Holtz, executive director of Progress Michigan. “This peek behind the curtain confirms that the Mackinac Center is not only advocating for hard-right policies, but this supposed non-partisan think tank is also intimately involved with Republicans in the mechanics of legislation. And it is doing so without the kind of transparency they routinely demand of others. Lawmakers should release all their communications with the Mackinac Center to prove that they are not being influenced by a group that has no business lobbying at the Capitol.”
The Midland-based Mackinac Center for Public Policy is registered with the Internal Revenue Service as a 501(c)3 tax-exempt, charitable organization that describes itself as “a research and educational institute.” While it is not registered as a lobbying organization with the state, a series of emails obtained by Progress Michigan indicates the Mackinac Center was actively seeking to influence legislation regarding health care benefits for teachers and other public workers. The emails involved communications between six Mackinac Center staff members and Republican State Rep. Tom McMillin between June 1 and June 8. McMillin is the Chair of the House Education Committee, appointed after the recall of former state Rep. Paul Scott.
State law requires any individual or corporation who lobbies to register with the Michigan Secretary of State and report lobbying expenditures that exceed certain spending thresholds. State law defines lobbying as “communicating directly with an official in the executive branch of state government or an official in the legislative branch of state government for the purpose of influencing legislative or administrative action.”
Moreover, on its 2010 IRS tax forms, the Mackinac Center specifically indicated it does not engage in lobbying. Tax-exempt charitable organizations like the Mackinac Center that lobby are required to inform the IRS about lobbying and there are restrictions on how much lobbying a charitable organization can undertake without risking loss of its tax-exempt status.
Progress Michigan has sent letters to the House and Senate requesting that, in the spirit of the Freedom of Information Act and Mackinac Center’s own history of advocating for transparency by state government, legislators release emails between themselves and their staffs and the Mackinac Center.
“The Mackinac Center seems clearly to have a lobbying agenda, and in his communication Representative McMillin did not object to its goals of destroying collective bargaining for teachers and other Michigan workers,” Holtz said. “Apparently Republican lawmakers have not heard the message from Ohio voters – a message that Michigan residents also have sent loud and clear: that collective bargaining is a basic right for every worker. Citizens deserve to know which elected officials and leaders are working with the Mackinac Center to destroy this right and the values we cherish in Michigan.”
Copies of the emails in question are available at http://www.scribd.com/doc/74052346/Mackinac-Center-Emails.
Mackinac Center’s 990 form for 2010 is available at http://www.scribd.com/doc/74049695/Mackinac-Center-990-form-2010.
Privatized Members Ratify New Contract
The Saginaw Public Schools/Sodexo Group (maintenance,grounds,custodians) approximately 67 members who were recently outsourced to Sodexo, have ratified a 3 year contract. Members were able to retain several things from the school, however they did see changes in other area’s such as health care. However they did get all the same holidays, raises each of the 3 years, a signing bonus and also started accruing vacation and sick time back to the take over date. The group ratified the contract by 98% that were eligible to vote (47 yes 9 no).
Thanks to the bargaining team: Kim Jesse, Sam McGee and Bob Campbell who all did a lot of hard work.