Lansing — The Michigan Senate is poised to vote Wednesday on a controversial plan to close the state’s defined-benefit teacher pension plan to new hires and instead offer them a 401(k)-style defined-contribution retirement plan.
Modified bills are set for committee consideration Wednesday morning ahead of a likely floor vote later in the day, said Senate Majority Leader Arlan Meekhof, R-West Olive.
“We have an unsustainable product in front of us,” Meekhof told reporters Tuesday, referencing $26 billion in unfunded liabilities associated with the Michigan Public School Employees Retirement System.
“If we continue at this pace, at some point the system won’t be able to support itself, and people who are counting on retirement probably won’t have one then,” he said. “So we need to make some reforms.”
Democrats, badly outnumbered in the upper chamber, are expected to unite against the proposal, which they view as a stepping stone toward an attempt to cut pensions for current and retired teachers.
“The retirement plan coming out of the Republican Party is obviously work until you’re dead,” said Senate Minority Leader Jim Ananich, D-Flint. “I don’t think that’s a sustainable model.”
Michigan’s GOP-led Legislature considered a similar proposal four years ago but ultimately created a hybrid retirement system for new teachers consisting of a traditional pension and defined-contribution plan.
Republican Gov. Rick Snyder has declined to speculate on potential Senate action, but has said teacher pension modifications are not high on his wish list for the final three weeks of the current legislative session.
“The hybrid system has worked well in Michigan and is a good program at this time,” Snyder said last week. “I’m always open to new ideas, but as a practical matter the hybrid system has been working, and I don’t have any intention to really talk about changing it at this point.”
Closing MPSERS to all new hires could create higher up-front costs for the state because fewer employees would be paying into a system with guaranteed benefits for current and retired workers already enrolled. But Meekhof said the forthcoming Senate plan will include a mechanism to minimize those costs.
“At one point, it was pegged at billions of dollars,” he acknowledged. “It’s not any of that. We think we have the right mathematics to work it out.”
The teacher retirement proposal is among a handful of controversial proposals state legislators could consider during the so-called “lame-duck period.” Any bills not sent to the governor’s desk in the next three weeks would have to be introduced next year.
House Republicans are developing a separate plan to address unfunded liability costs at the local government level, likely by changing health care coverage for municipal employees. They are expected to unveil the plan in coming days and hold at least one committee hearing before any floor votes.
The House will take a close look at any Senate proposals for changes to the teacher retirement program but believes local government liabilities are a more pressing issue, said GOP spokesman Gideon D’Assandro.
“We’ve got a lot of local governments, counties, cities, villages townships, ... on a path towards bankruptcy and they’re still chugging along in that direction,” he said. “We’ve got to do something to get them on a different path.”
Meekhof dismissed the suggestion that the pending teacher retirement proposal deserves a more thorough vetting than the lame-duck period will allow.
“It’s been on our list for at least six years, since I’ve been in the Senate,” he said. “I think we have a good suggestion, a good idea, and I think we’re going to try to make that happen.”
A group of state pensioners, including retired teachers represented by the Michigan Education Association, visited the state Capitol Tuesday in an attempt to dissuade the Legislature from acting on the retirement changes.
They are expected to return Wednesday morning as the bills go before the House Appropriations Committee.
“At this point, shut it down, and let’s see how well the 2012 (hybrid plan) is working,” said Randolph Ston, a retired educator from Commerce Township.