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Business leaders: Close pensions to new state employees

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – An influential group of Michigan business leaders is urging state policy makers to close pensions to new government employees and end retirement health care benefits for future hires, setting the stage for renewed debate in Lansing.

Business Leaders for Michigan on Monday released a new report on “ensuring long-term fiscal stability,” arguing that unfunded liabilities pose a threat to state and local governments that can discourage business investments as companies choose when and where to locate.

“Our view is we need to do it in a way that keeps the promises that were made to (current and retired) employees while we try to take steps in rein in costs,” President and CEO Doug Rothwell said during a fiscal stability summit in Lansing.

The report, which also calls for policies to promote economic growth and prevent local fiscal emergencies, comes as a task force appointed by Republican Gov. Rick Snyder prepares its own recommendations for “responsible retirement reform for local government.”

Reform advocates say local governments across Michigan are on the hook for a collective $10 billion in retiree health care costs they’ve promised employees and an estimated $4 billion in pension liabilities. Despite recent reforms, the state’s teacher pension system also remains saddled with more than $26 billion in unfunded liabilities.

Michigan’s Republican-led Legislature considered bills late last year that would have required current local government retirees to pay 20 percent of their costs in certain communities, drawing the ire of police officers and firefighters who argued it could have been “devastating” for municipal retirees.

A separate plan pushed by Senate Majority Leader Arlan Meekhof, R-West Olive, would have moved all new teacher hires into 401(k)-style retirement plans, ending a hybrid plan that replaced traditional pensions in 2012. That transition would have been costly, according to the Snyder administration, which opposed the proposal.

Meekhof said Monday he anticipates the Legislature taking another serious stab at both teacher pension and local government retiree health care reforms this year, telling business leaders that both remain a top priority.

“When you’re in trouble and you’re digging a deeper hole, you’ve got to stop digging,” he said at the summit “We’ve to make some structural changes so Michigan is not in the pension business. We’re not very good at it.”

After the event, Meekhof said he anticipates the Legislature will pursue the teacher pension reforms first, suggesting that changing benefits for local government employees like police officers and firefighters could be more politically difficult.

While he offered few details about potential legislation, Meekhof said he wants to move all new teacher hires to 401(k)-style plans and give some recent hires the option to transition over as well.

He wants to scrap the hybrid retirement system for teachers, which the Snyder administration says is fully funded and appears to be working well. Democrats have also questioned the motivation for teacher pension reform.

“We just changed the system, and it’s working,” said state Sen. Curtis Hertel Jr., D-Meridian Township. “There’s no reason other than a political backlash against teachers to change the plan right now.”

Democrats acknowledge that unfunded liabilities pose a threat to local governments, but argue the problem has been exacerbated by cuts in state revenue sharing to municipalities, which they want to see reversed.

Snyder’s task force on unfunded liabilities includes a mixture of subject-area experts, local government officials, labor representatives and legislators. It is expected to finalize recommendations by the end of April or in May.

joosting@detroitnews.com