Republican bills close pension to new hires, provide 401(k)
LANSING, Mich. (AP) — Majority Republicans introduced long-expected legislation Tuesday to close the school employees’ pension system to new hires and provide them a 401(k), sparking both applause and outrage while renewing uncertainty over state budget talks.
The identical House and Senate bills would affect teachers and others hired after Sept. 30 and are modeled after a plan that has been offered to state employees hired since 1997.
Current school workers contribute a portion of their salary to receive a pension in retirement. They also get a 1 percent contribution into a 401(k) if they put in 2 percent. Under the legislation, new hires would receive a 401(k) including a 4 percent employer contribution and an extra 3 percent if they put in 3 percent.
GOP lawmakers — who were praised by conservative groups — said the bills would prevent Michigan from continuing to accumulate debt in the pension system and ultimately save more money for classrooms. But they acknowledged that Republican Gov. Rick Snyder, who is concerned about the upfront transition costs of closing the hybrid plan to new people, is still not on board after they met again Tuesday.
“We’re going to convince him that the math works,” said Senate Majority Arlan Meekhof, who along with House Speaker Tom Leonard has halted high-level budget talks with the Snyder administration while pushing the retirement switch they hope to move in concert with a spending plan that typically is enacted in June. “If we don’t stop digging the hole, it just gets bigger and bigger and bigger.”
Conservatives noted that while Snyder and legislators previously moved to address some of the debt, the teacher’s pension unfunded liability grew by more than $11 billion to $29 billion from 2010 to 2016.
Democrats and labor unions criticized the legislation. And liberal activists who had traveled to the Capitol for a lobbying day held an impromptu, lively rally outside Meekhof’s office to protest the new bills.
Sen. David Knezek, D-Dearborn Heights, said “anybody with a sound mind” would reject the proposal after examining financial implications that could total billions of dollars initially.
“It’s easy for someone to talk about balancing a spreadsheet,” he said. “But ... what impact is this going to have on the lives of everyday people?”
Steven Cook, president of the Michigan Education Association, the state’s largest teachers’ union, cited teacher shortages and said “continuing to attack livelihood and retirement security” of school employees would only encourage more educators to leave the profession.
“If there is additional (school aid fund) dollars available, they should be added to the per-pupil payments to school districts, not poured into the latest Lansing ideological shell game,” he said.
Meekhof countered that “the world never stopped” 20 years ago when Michigan closed state workers’ pension system to new hires, adding that people do not go into teaching to get a pension.
Republican-controlled committees are expected to take testimony on the bills, but no hearings have yet been scheduled.
Snyder has privately floated other changes to the school retirement system, such as offering incentives to teachers to voluntarily take a 401(k) that would be more generous than now.
“He appreciates the positive tone of ongoing discussions with the Legislature and will continue working with them on a compromise plan and timely completion of another balanced budget,” spokeswoman Anna Heaton said.
House bill 4647: http://bit.ly/2relgbA
Senate Bill 401: http://bit.ly/2rQIMYk