Index of Past State of the Union Reports 

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November 1, 2004

BOARD ELECTION

This fall, seven people declared their candidacy for two open seats on the Dearborn Board of Education/ HFCC Board of Trustees. Faced with a mix of incumbents and others who seemed potentially beneficial to the College, Local 1650 faced difficulties in deciding whom to assist. At interviews held by the USA Committee, representing all the District employee unions, Local 1650 representatives heard the candidates discuss the qualities they would bring to the Board. Ultimately, the Local made an unusual move and decided to provide financial assistance to three highly qualified candidates, instead of formally endorsing only two.

The Local is supporting the following three candidates: Mr. Hussein Berry, Mr. Darrell Donelson, and Ms. Sharon Dulmage. Each candidate has a strong record of community involvement and the support of prominent community leaders. Furthermore, Mr. Berry represents an important segment of our community not currently represented on the Board. Mr. Donelson, a recently retired Dearborn Schools’ teacher and principal, brings an intimate knowledge of the schools and their needs. Finally, given her nearly twenty-year tenure on the Board, Ms. Dulmage provides institutional history and continuity to a Board that may well change dramatically over the next four years.

In a letter to the candidates who did not receive support from Local 1650, President John McDonald expressed appreciation of each candidate’s commitment to the betterment of our schools and community, and he shared the Local’s rationale for assisting the three candidates listed above.

HFCC’s operating budget will incur at least $1.5 million in increased retirement costs over the next three years as a result of two factors impacting the Michigan Public Schools Retirement System (MPSERS).

HFCC’s current annual contribution of 14.8% of total payroll to MPSERS will rise to 20% of payroll by 2008, in part because of diminishing returns on MPSERS’ investment portfolio and primarily as a result of new auditing regulations requiring pre-funding of retirement health care costs. Such regulations have arisen due to financial and auditing scandals in the private sector. Last year, HFCC experienced the first effects of such regulations, as the College was required to pre-fund the full impact all future severance pay obligations, some $600,000, which had been previously paid as incurred.

It now appears that MPSERS will have to pre-fund the full impact of all retiree health care coverage for all public school and community college employees. While such pre-funding may be sound fiscal and actuarial practice, the consequences of such for HFCC employees are several and serious.

First, the College’s budget has already endured over $2.5 million in State funding cuts in the last three years, resulting in a wage freeze, reduced starting salaries, postponed replacement of full-time faculty, and an increase of $8.00 per credit hour in non-resident tuition. An additional $500,000 reduction in the College’s budget in each of the next three years to cover health care pre-funding equates to a wage cut of 2.5%, the loss of eight full-time replacement positions, or a tuition increase of at least $6.00 per credit hour.

Second, there will now be even more intense pressure to diminish or do away with retiree health coverage and the defined benefit pension for future hires. For several years, Republican legislators have been pushing for a “graded premium” health benefit system, which would require employees to work 30 years before qualifying for full health benefits under MPSERS. This would severely disadvantage part- time employees, women who interrupt their careers to raise families, and candidates who come into teaching in mid-career. All of this assumes that the Legislature will not do away with retiree health care coverage in its entirety for future hires.

There will also be intensified pressure to move the entire pension system from a “defined benefit” to a “defined contribution” system. Under the current defined benefit system, an employee is guaranteed a pension benefit base upon earnings and years of service. Under a defined contribution system, one’s pension benefit depends on how well annually invested amounts fare in the stock market, there is no guaranteed pension, and one’s investment returns must cover the cost of future health care coverage as well.

Third, current retirees and current employees are not immune from the impact of this intensified pressure on MPSERS. Another legislative response may well be significantly increased co-pays, deductibles, and coverage limitation for those already in the system.

Fourth, there is no guarantee that the impact of all of this on HFCC will be limited to $1.5 million over the next three years. The pre-funding of retiree health care will hit financially strapped K-12 school districts very hard. Should the Legislature succumb to what will be great pressure to minimize the impact on school districts, the impact on the rest of the State budget - including community college funding - will be all the more severe. Community colleges could well face increased retiree health care costs and decreased funding from the State, as it attempts to mitigate the impact of health care costs on school districts.

In all of this, one thing is very clear. We must be actively engaged in the political arena and make our needs and presence felt. Local 1650’s leadership and Legislative Committee will soon call upon you to lobby your legislators to fund education and the retirement benefits of educational employees. The object lesson remains the same as in years past. If we concede the political arena, parties opposed to funding public education - parties opposed to the very principle of public education - will prevail.

John McDonald

As of October 25, 2004, 81% of the Union membership had responded to the Union’s request for PAF contributions, donating a total of $13,420 to Local 1650’s Political Action Fund. Local 1650’s Executive Board has recommended that each teacher contribute $80 to our local PAF. Members are also asked to contribute $20 to the MFT&SRP political fund. The response so far is significantly lower than in the past, when up to 95% of the membership contributed.

Local 1650 faces many serious challenges that will require our active involvement. Most notable are the continuing State budget crisis and its inevitable exacerbation by new, fast approaching changes in auditing requirements for retiree health care benefits as well as another election next fall for two more open positions on the HFCC Board of Trustees/Dearborn Board of Education. To support our political action, additional contributions are sorely needed. The Executive Board hopes that new instructors, in particular, appreciate the importance of our full political involvement.

How will your contributions be used? As in the past, Local 1650 operates two PAF funds. The first, a restricted fund, is used only for local millage/bond elections, Board of Trustees’ campaigns, and the campaigns of municipal and/or State Legislative candidates representing HFCC’s district. The Local uses the “unrestricted” fund to engage in political activity and to support candidates not so directly involved with HFCC but whose decisions definitely affect Local 1650’s ability to represent the interests of its members. Gubernatorial, State Supreme Court, Attorney General, and important out-state legislative races fall into this category. No Local 1650 PAF monies go to Federal candidates or parties.

The Executive Board thanks those who have already contributed and thus supported Local 1650’s political efforts to protect their bargaining rights and secure the local and State funding necessary to operate HFCC, maintain instructional quality, and compensate its employees. Checks should be made out to HFCC-FT 1650 PAF ($80) and the MFT&SRP COPE ($20) and forwarded to your Area Representative.

Using part of our November General Membership meeting to discuss financial planning issues has become almost as predictable as the change of seasons, and this year’s no different! On November 15, 2004, we’ll review highlights of Flexible Spending Accounts (FSAs) and tax-sheltered annuities and entertain questions about both.

For many years Local 1650 members have had the option of establishing a Flexible Spending Account through payroll deductions. These pre-tax dollars can be used to cover medical expenses not covered by insurance (such as deductibles, co-pays, and over-the-counter medical purchases) and child care costs. To set up an account, however, teachers must file a payroll deduction form with Human Resources each year. The filing deadline for a 2005 FSA is December 1.

Payroll deduction forms will be available at the November 15 Membership Meeting and are also available from John McDonald’s office or from Dani Thornfelt in Human Resources. Send completed forms to Ms. Thornfelt by December 1.

At our November meeting, we’ll be joined by Mr. Gary Niemczak from Consolidated Financial Corporation, a Michigan-based corporation which specializes in the design, implementation and administration of pension and employee benefit programs. This company administers our FSA program. Mr. Niemczak will answer any questions members have about the FSA program and will discuss various tax-sheltered annuity opportunities also available through payroll deduction. Please plan to join us.