House, Senate leaders move ahead on teacher pensions

Nicquel Terry
The Detroit News

House and Senate Republican leaders have moved forward with state budget targets and agreed to set aside $475 million for teacher pension reform.

Both chambers cut money from the governor’s proposed budget and dipped into a one-time $330 million surplus to create room for the pension reform payment.

Senate Majority Leader Arlan Meekhof, R-West Olive, and House Speaker Tom Leonard, R-Dewitt, reportedly pushed the budget ahead this weekend despite differences with Gov. Rick Snyder.

Budget talks with Snyder had been derailed earlier this month over his reluctance to embrace their plan to close the state’s teacher pension system to new hires and move them into 401(k)-style retirement plans.

“The legislative leaders are committed to moving forward on the budget,” said Amber McCann, spokeswoman for Meekhof, in an email. “Senator Meekhof and the Speaker have not yet reached an agreement with the governor regarding retirement reform.”

Gideon D’Assandro, a representative for Leonard, also confirmed that the budget process was moving forward.

“We need to see progress in the negotiations over MPSERS for the administration to get involved,” D’Assandro said in an email, referring to the Michigan Public School Employees Retirement System. “Solving MPSERS and the debt crisis crushing our local schools is an important part of this budget process.”

Anna Heaton, a spokeswoman for Snyder, released a statement Monday saying, “We appreciate their work to keep the budget process moving and look forward to continuing discussions with our legislative partners.”

Legislative leaders were working with the administration to set new spending targets for the 2018 budget before talks broke off this month. They’ve boasted of finalizing budgets by early June each of the last six years but do not technically need to do so until Sept. 30, when the current fiscal year ends.

Under the legislation, public school employees hired on or after July 1, 2017, would be put into a 401(k)-style retirement plan. A school district would automatically contribute an amount equal to 4 percent of an employee’s salary. Under an amendment adopted last year, the state would also match an additional employee contribution of up to 3 percent.

The state’s traditional teacher pension system is saddled with more than $29 billion in unfunded liabilities, fueling Meekhof and Leonard’s budget-season push to close the system, which could entail significant costs.

Snyder opposed a similar plan last year, balking at transition costs and arguing a newer “hybrid” pension system is working well. The hybrid system that all new teachers now enter is fully funded. The governor recently cracked the door to renewed negotiations but has not signed off on broad enough reforms to satisfy legislative leaders.

Snyder’s budget plan has differed from House and Senate leaders throughout the budget season. And Snyder has expressed concern with some budget reductions by both the House and Senate but has largely avoided direct criticism during the legislative process.

The Senate’s $56.1 billion budget plan for fiscal year 2018 would trim $270 million in general fund spending proposed by the governor and hold off on a $266.5 million deposit into the state’s “rainy day” savings fund.

One cut included slashing the $5.6 million Snyder proposed to expand the Pathways to Potential program, which places social workers in schools to help struggling students boost attendance and connect families to community resources.

The House approved a $55.8 billion budget plan this month that trimmed $272 million in general fund spending in Snyder’s proposed blueprint.

The Senate and House K-12 budgets both include $2.5 million in continued public funding to reimburse private schools for state mandates. Snyder had proposed dropping the funding, which is the subject of a lawsuit in state court questioning whether it violates a constitutional prohibition against using taxpayer funds to directly support non-public schools.