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To:      RCC Board
From:  Ellen Hoekstra and Todd Tennis
Date:   January 14, 2008
RE:     Update on Legislative

Lansing became the traditional ghost town over the holidays, and is only now beginning to re-emerge for another year of policy work.  The dominant issue of 2007 was the budget, and we are hoping that this year’s appropriations work will be less eventful.  The state closed its books on a small surplus last year, but the economic forecast has not improved enough to take us out of the danger zone.

There are several issues still pending that will keep RCC busy in 2008.  The House’s newest committee – Retiree Health Care Reforms – continues to pursue its agenda of making retiree health care more affordable.  As was reported last month, the latest proposal would move the administration of state and judicial retiree health care from Civil Service to the Office of Retirement Services.  Other issues moving this year include changing the Legislative retirement system and granting local units of government the ability to bond for the unfunded accrued liability of their retiree health plans.

RCC and SERA Oppose SERS Move

Late last year, the House Retiree Health Care Reforms Committee reported House Bill 5545 that would transfer the administration of the State Employee Retirement System from Civil Service to the Office of Retirement Services.  The Office of Retirement Systems currently administers the Michigan Public School Employees Retirement System.  Representative Mark Meadows (D-East Lansing), sponsor of the bill, stated that he is seeking ways to create administrative efficiencies for state-run retiree health care. 

Several state employee organizations, however, are concerned that the change will have a negative impact on retiree health benefits.  The State Employee Retirees Association gave testimony in December citing concerns with how the move could negatively affect retirement benefits.  The current system of health benefits for retirees essentially mirrors the benefits received by active employees.  Therefore, there is some level of collective bargaining affecting retiree health benefits that could be lost should this bill pass.  These concerns are shared by the RCC, along with several unions representing state employees.  RCC lobbyists plan to meet with Representative Meadows to further discuss our opposition to the bill.  We recommend that RCC organizations engage in a letter writing campaign to state legislators urging them to oppose the bill as it came out of committee.

The bill is now awaiting action on the House floor.

MEA Argues for Prefunding Before House Committee

Donald Noble and Charles Agerstrand from the Michigan Education Association provided testimony before the House Retiree Health Care Reforms Committee on January 10.  The crux of their comments was that the Legislature needed to commit to prefunding retiree health care.  As health care costs have steadily increased, more and more of the burden of those costs has been shifted onto retirees.  Mr. Agerstrand noted that many of these problems would have been avoided if the state had stuck to its prefunding plan begun in 1985, rather than abolishing it in the early 1990’s. 

Representative Marty Knollenberg (R-Troy) sympathized with the higher share of health care costs retirees must pay today, but stated that cost-sharing was a piece of the overall solution that cannot be ignored.  Mr. Noble countered that the line had gone so far that some retirees have less than $200 per month left of their pension checks after the health care costs have been taken out.

Although most committee members seemed to agree that prefunding was a necessary part of the solution, there was divergent opinions on other ways to deal with the retiree health care issue.  Representative Andy Coulouris (D-Saginaw) hoped that the federal government would take a serious look at the overall cost of health care and implement a universal health care system.  Representative Chuck Moss (R-Birmingham), while supportive of some level of prefunding, worried about the impact these costs on the taxpayer.  Representative Lorence Wenke (R-Richland) made it clear that while there may be a moral prohibition against reducing retiree health care benefits, there was not a legal restriction.

During the discussion, Representative Meadows brought up the idea of segregating a portion of Lottery revenues for the purpose of prefunding retiree health benefits.  This and other ideas will continue to be discussed by the committee.

Legislature Votes to Scale Back Retiree Health Benefits for Future Legislators

In a long overdue case of “what’s good for the goose…” the House and Senate in the last few months have both passed legislation to implement a version of the graded scale premium for legislators.  The House-passed version of SB 868 is identical to the new system for state employees (3% per year up to a maximum of 90%).  The Senate-passed version is more lucrative, starting at 30% after four years, and going up by 6% for each year of service after that.  A companion bill, SB 869, would amend the Judges Retirement Act to make similar changes to the Governor and Lt. Governor’s retiree health benefits.