By Nancy Derringer/Bridge Magazine
Confronted with concerns that a bill to revamp the teacher retirement system would lead to a mass exodus of veteran teachers this year, Republicans who control the Legislature are tinkering with Senate Bill 1040 to reform the Michigan Public School Employees Retirement System.
Faced with $45 billion in unfunded liability and with contributions from school districts — the main funders of the system — skyrocketing, the Legislature has made passing reforms a priority this year. As originally written, SB1040 increases contributions from members in all phases of the system, raises the retirement age in increments and changes the retiree health-care premium benefit from 90 percent paid by the state to 80 percent.
Last week, Republicans joined with Gov. Rick Snyder in announcing major changes to the bill, among them the removal of a graded retiree health-care premium subsidy for employees hired before July 1, 2012, as well as a requirement that most current employees not receive retiree health-care benefits before age 60.
“Retirement is a significant life decision and one that is made with great planning and consideration for the future. These changes to Senate Bill 1040 were made in order to mitigate the impact of the unfunded liability on those nearing retirement,” Senate Majority Leader Randy Richardville, R-Monroe, said in a statement.
Sen. Roger Kahn, sponsor of the bill, said he would amend it to include a $140 million contribution from the state’s School Aid Fund. Many MPSERS members have complained, in testimony about the bill, that while the system’s problems are not of their making, they are expected to carry the full cost for mitigating the unfunded liability.
Kahn estimated the changes will reduce the unfunded liability by $15 billion, although the Senate Fiscal Agency did not offer revisions to their original analysis of the bill, which estimated the savings from the now-discarded graded premium and age-60 health-care restriction at $4.1 billion. The original draft of SB1040 was estimated to reduce unfunded liabilities by a total of $9 billion.
Kahn also said Tuesday that money now being held in escrow for retiree health care, imposed via a fee in 2010 and immediately litigated, could play a role in the final solution, although there is no timetable for a court ruling on the fee. That fund was at $296.4 million in September 2011, according to the MPSERS comprehensive annual financial report.
Kahn said the Legislature wants to re-establish pre-funded retiree health-care — which Michigan abandoned in the 1990s — since one factor in the growth of unfunded liability has been the sharp increases in retiree health-care benefits.
“We’ll be having discussions over the next few days (with stakeholders),” Kahn said.
John Olekszyk, who testified about the bill on behalf of the Coalition for a Secure Retirement, an educators group, said the coalition was pleased with the changes.
“It demonstrates a recognition of the concerns and issues we’ve raised during the last couple of weeks,” Olekszyk said. “We think the Legislature should continue to look at pre-funding the health care, as a possible long-range solution.”
Spokespersons for the Michigan Education Association, the state’s largest teachers union, did not return calls seeking comment.
Staff Writer Nancy Nall Derringer has been a writer, editor and teacher in Metro Detroit for seven years, and was a co-founder and editor of GrossePointeToday.com, an early experiment in hyperlocal journalism. Before that, she worked for 20 years in Fort Wayne, Indiana, where she won numerous state and national awards for her work as a columnist for The News-Sentinel.