Lansing — Hundreds of police officers and firefighters are expected to gather Tuesday at the Michigan Capitol to protest what they’re calling “anti-public safety” legislation that would force many local government retirees to pay more for their health care and end post-employment coverage for new hires.
With just two weeks left in the “lame-duck” session, Michigan’s Republican-led Legislature is fighting a tight timeline and intense backlash as leaders also push a separate plan to end teacher pensions for new hires.
Both controversial proposals seek to address tens of billions of dollars in unfunded liabilities GOP sponsors say could cripple local governments or school districts, pushing them toward financial collapse that would ultimately jeopardize retiree benefits on a much larger scale.
But teachers, police officers, firefighters and other local government workers are bemoaning the bill packages as coordinated attacks on their livelihoods that would hurt the ability to attract talented workers to the critical fields.
“The profession of policing is probably under one of the most unprecedented attacks we’ve ever seen in our history,” said retired Livonia Police Chief Bob Stevenson, head of the Michigan Association of Chiefs of Police, referencing a spate of fatal shootings of police officers.
“We were shocked to see the next attack on our profession would come from Lansing.”
Without unprecedented action to address mounting unfunded liabilities, more Michigan communities could be forced into bankruptcy like Detroit was in July 2013, according to House Speaker Kevin Cotter, R-Mount Pleasant, who sponsored a main bill in the new package.
“It is seriously that pressing,” Cotter said. “And to the extent we do, we’re going to have this situation again where we have much deeper haircuts being taken. No one wants to see that, so let’s do something now to save the programs.”
The House proposal, set for a second committee hearing this week, would require retirees to pay at least 20 percent of their own health care costs if they worked for a local government with significant unfunded liabilities.
The cost-sharing requirements would not apply to cities, villages, townships or counties with well-funded post-employment benefit programs, but the vast majority are underfunded. Detroit retirees, who already took significant cuts in the city’s bankruptcy case, would not be affected.
The 13-bill package would prohibit local governments from offering retiree health care coverage to new hires. Instead, they could choose to contribute to a tax-deferred health savings account at an annual amount capped at 2 percent of an employee’s base pay.
A separate Senate package would close the state’s teacher pension system to new hires and instead offer them a 401(k)-style defined-contribution retirement plan.
Unfunded liabilities grow
Reform advocates argue aggressive action is warranted because unfunded liabilities have created a massive, but often unnoticed, threat for governments across the state.
The Michigan Public School Employees Retirement System had accrued more than $26 million in unfunded liabilities as of 2015, according to the nonpartisan Senate Fiscal Agency.
Cities, townships, villages and counties have an estimated $11 billion in unfunded retiree health care liabilities. Moving to close those funding gaps is costing many municipalities significant money that could otherwise be spent on residential services.
Lansing, Warren, Flint, Taylor, Westland and Saginaw had each accrued more than $200 million in unfunded health care liabilities through 2014, according to a Michigan State University analysis. Pontiac, Dearborn, Ann Arbor and Grand Rapids each topped $100 million.
“Bad assumptions and unrealistic promises are strangling the budgets of our schools and local governments,” Doug DeVos, John Kennedy and other members of the 13-person West Michigan Policy Forum executive committee said in a Monday letter to legislators obtained by The News.
The liabilities are “piling a debt burden on the backs of our children and grandchildren” and “risking the future of hardworking teachers, police officers and other public workers — the promises made to them must be kept,” they wrote.
Opponents acknowledge the magnitude of the unfunded liability problem, but they oppose a “cuts-only” approach for local governments. They argue both proposed solutions deserve a more thorough vetting than the lame-duck period will allow.
Holding an initial hearing on the bills last week — the next morning after they were introduced — was “straight out of the Saddam Hussein playbook,” said Ken Grabowski of the Police Officers Association of Michigan.
“Anybody who would support this in lame-duck is an enemy of public safety. We are willing to sit down and talk with people and work things out,” said Grabowski, but to move the bills now would be “cowardly.”
Reform effort hits bumps
The teacher pension proposal stalled last week on the Senate floor amid pushback from the administration of Republican Gov. Rick Snyder. His Office of Retirement Services told legislators the plan could entail as much as $25 billion in transition costs over the next 30 years.
Snyder supports a hybrid teacher pension plan the state adopted in 2012, which includes a combination of defined-benefit and defined-contribution options.
“He believes moving to close that right now would not be financially prudent due in large part to the transition costs,” spokeswoman Anna Heaton said in an email.
The transition cost projections are causing heartburn for some legislators, too, said Sen. Majority Arlan Meekhof, R-West Olive, who hopes to find enough votes for passage this week.
“I think all of the stuff we’re talking about in lame duck is a heavy lift, some more than others,” he acknowledged.
Signals for compromise
Cotter remains committed to the retiree health care reform proposal but has signaled he is willing to consider modifications to win support.
“I’m sensing an interest,” he said. I don’t know exactly what that results in. I don’t know if it’s this version of the bills … but I think this is something that is worth continuing to push forward on.”
The persistent push by GOP legislative leaders is setting up what could be a dramatic final two weeks in Lansing, where legislators are facing other important decisions, including a sweeping plan to overhaul the state’s energy policy.
Police and fire unions are organizing what they expect to be a large protest on Tuesday, and Democrats are considering ways to use whatever leverage they have to stop the proposals.
At least one Democrat, Sen. David Knezek of Dearborn Heights, said last week his colleagues should threaten to withhold votes on the energy package if Republicans move forward with the retiree health care or teacher pension plans.
“I’ve got the guts to do it,” Knezek said. “I would like to see other Democrats step up and say we’re not willing to pass legislation while at the same time workers are going to be negatively affected in this state.”