LANSING, Mich. (AP) — A push to curtail health care benefits for current and future municipal retirees in Michigan is setting off a fight between Republicans and local governments who say billions in debt can no longer be ignored and Democrats, police and other public workers who contend it would cheat people out of their coverage.
The newly introduced, GOP-sponsored plan — which was the subject of an initial House hearing Thursday and could be enacted yet this year in the “lame-duck” session — has major components aimed at addressing $11 billion in unfunded health care liabilities.
Starting in May, newly hired municipal workers would no longer qualify for health insurance in retirement — which has applied to new teachers for four years. Local governments could instead contribute a maximum 2 percent of their base pay to a tax-deferred account such as a health savings plan.
In counties, cities, townships and villages that are not funding at least 80 percent of their liabilities, retirees would have to pay at least 20 percent of the cost of their benefit unless it is determined to be a “vested” benefit. Many public workers have had to pay 20 percent since 2012.
Retiree health benefits would be a prohibited subject of collective bargaining. Retirees who go work somewhere else could not get municipal health insurance if coverage is available for their new employer. And a law that provides for binding arbitration for police and fire departments in labor disputes would be amended to prohibit orders that include retiree health benefits.
The 13-bill package could result in “significant but indeterminate” savings for municipalities, according to an initial House Fiscal Agency analysis.
A lead sponsor of the plan is outgoing House Speaker Kevin Cotter, which signals it will be a priority in the final two weeks of the two-year term. He pointed to Detroit’s bankruptcy, which resulted in retirement benefits being cut, as a reason to act now.
“While it will require some additional employee contribution, this is a step forward toward protecting pension benefits, toward protecting in this case (health) benefits,” said Cotter, R-Mount Pleasant. “If we allow it to go unaddressed for a longer period of time, we’re going to have that situation again where we have municipalities in bankruptcy. It is seriously that pressing. … Let’s do something proactively now to save the programs.”
But Rep. Jeremy Moss, D-Southfield, called the legislation “incredibly problematic” and said it should be dumped in favor of something else to help communities meet the “pervasive unfunded-liability problem.
“This is a cuts-only approach,” he said. “It’s very elementary. It’s very lazy and it’s very concerning to the many people it’s going to impact. We have six days left of this legislative session where we’re tackling an issue that could take a whole legislative session to get right. To tackle an issue this important under … duress, which impacts the checkbooks of so many retirees in our state, is wrong.”
The debate comes as another major retirement proposal — closing the pension system to newly hired school employees and giving them only a 401(k) instead — is stalled in the GOP-controlled Senate after narrowly clearing a committee on Wednesday. Republican Gov. Rick Snyder, who opposes the move and favors a hybrid pension-401(k) system created in 2010, does want to tackle municipal legacy costs, either this month or in the 2017-18 session.
Unlike accrued pension benefits, which are protected by the Michigan Constitution, health coverage for current employees and retirees can be scaled back.
Eric Scorsone, senior deputy state treasurer for finance, said many municipalities have as many retirees as they do workers — making it “very difficult” from a budgetary standpoint. Unlike with pensions, which have been at least partially pre-funded for decades, most local governments did not account for their health liabilities until 2008 under changed accounting standards, he said.
Many spend as much as 20 percent of their revenue on retirees’ health care, Scorsone said.
“It is one of the biggest financial risks we see as we’re trying to maintain the fiscal health of our communities,” he said. “The problem varies a lot. It’s not everywhere, it’s not every community. But it is quite a few.”
The bills face vigorous opposition from police, firefighters and others, including the Michigan AFL-CIO, a federation representing more than 1 million active and retired members of 59 unions throughout the state.
Rep. John Chirkun, D-Roseville, worked at the Wayne County Sheriff’s Office for 29 years and was vice president of the union that represented deputies.
“You’re attacking their health care,” he told the GOP-led House Local Government Committee. “They spent a whole career serving the public, keeping them safe, trying to lock people up.”
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Online:
House Bills 6074-86