Ben­e­fits

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Se­nate Mi­nor­ity Leader Jim Ananich, D-Flint, said “prom­ises that have been made have to be kept” and called the re­vised plan an im­prove­ment.

The scaled-back pro­posal re­quires lo­cal gov­ern­ments to pre­fund re­tiree health ben­e­fits for new hires and re­tiree pre­mi­ums. It man­dates more re­port­ing to the state by 2018.

Plans short of fund­ing 40 per­cent of fu­ture health care obli­ga­tions and 60 per­cent of pen­sions would be sub­ject to ex­tra scru­tiny by the Trea­sury Depart­ment and mu­nic­i­pal­i­ties that don’t re­ceive a state waiver would be over­seen by a three­mem­ber Michi­gan Sta­bil­ity Board made up of peo­ple ap­pointed by the gov­er­nor.

The board could re­ject plans put forth by lo­cal gov­ern­ments to fix their fi­nances to fund re­tiree health care costs. Law­mak­ers could not agree on whether to al­low the board to make changes to ben­e­fit plans or other ac­tions for com­mu­ni­ties strug­gling to re­solve fi­nan­cial prob­lems.

Po­lice of­fi­cers and fire­fight­ers protested po­ten­tial ben­e­fit cuts last week be­fore the leg­is­la­tion was even in­tro­duced, and they were a reg­u­lar pres­ence in the Michi­gan Capi­tol this week as leg­is­la­tors con­sid­ered changes.

While unions ac­knowl­edged long-term debt prob­lems in some com­mu­ni­ties, they said many al­ready have started work­ing to fund health care ben­e­fits, which tra­di­tion­ally had not been re­quired.

Mike Sauger, vice pres­i­dent of the Michi­gan Fra­ter­nal Or­der of Po­lice, said unions could not change Re­pub­li­can lead­er­ship’s po­si­tion but man­aged to con­vince enough GOP law­mak­ers to stop the orig­i­nal plan.

“I know that we changed the ma­jor­ity of the Rep­re­sen­ta­tives’ minds,” Sauger said. “There’s very few com­mu­ni­ties right now that need im­me­di­ate in­ter­ven­tion, and there’s al­ready tools in place to deal with those ... that’s the emer­gency man­ager law.”

The most des­ti­tute cities, such as Ben­ton Har­bor and Lin­coln Park, have al­ready had emer­gency man­agers and have seen ben­e­fit cuts in some cases, Sauger said.

“I think it was the pub­lic em­ploy­ers, the man­age­ment groups, the unions and the leg­is­la­tors — we all were on the same page here in the end,” Sauger said. “It wasn’t a union vs. man­age­ment or any­thing. It was ev­ery­body was work­ing to­gether. We want to pro­tect the prom­ises made. ... We want the same thing.”

The House ap­proved iden­ti­cal bills in a se­ries of 107-3 votes and 105-5 on the main bill. One of the cham­bers will have to vote again next week to send the pack­age to the gov­er­nor’s of­fice.

The two House Re­pub­li­cans who had spon­sored the orig­i­nal pro­posal, Rep. James Lower and Rep. Thomas Al­bert, voted against the scaled-back ver­sion. Rep. Yousef Rabhi, D-Ann Ar­bor, also voted against the plan.

Lower said Re­pub­li­cans took out so many “non-con­tro­ver­sial” pro­vi­sions he could no longer sup­port it.

“I’ll be hon­est, it was just kind of a let­down for me at that point,” Lower said. “I get that we didn’t have the votes, no­body’s dis­put­ing that. I just didn’t end up agree­ing with the di­rec­tion we took it in.”

The late-night vote-wran­gling came this same week as sep­a­rate House and Se­nate pan- els ap­proved iden­ti­cal 16-bill pack­ages that would have al­lowed the state to send three­mem­ber fi­nan­cial man­age­ment teams into lo­cal com­mu­ni­ties and give them broad pow­ers to ad­dress un­funded re­tire­ment obli­ga­tions.

Dan Gil­martin, CEO ex­ec­u­tive direc­tor of the Michi­gan Mu­nic­i­pal League, called the Thurs­day morn­ing vote a “leg­isla­tive re­treat” and a “colos­sal missed op­por­tu­nity” to head off a fi­nan­cial threat fac­ing cities across the state. His group had op­posed the leg­is­la­tion as in­tro­duced but was hop­ing to ne­go­ti­ate a stronger com­pro­mise.

Busi­ness for Lead­ers Pres­i­dent and CEO Doug Roth­well called the re­vised pack­age “an im­por­tant first step” to pre­serv­ing promised re­tire­ment ben­e­fits. But he pre­dicted data gath­ered through new re­port­ing re­quire­ments “will show that the prob­lem is se­ri­ous and that ad­di­tional ac­tion will be nec­es­sary to pro­vide sta­bil­ity for our lo­cal gov­ern­ments.”

Democrats ar­gued the ini­tial pro­posal granted too much author­ity to state gov­ern­ment in ad­dress­ing long-term debts in a fash­ion sim­i­lar to con­tro­ver­sial emer­gency man­agers. The teams would have been em­pow­ered to mod­ify ben­e­fits, change bud­gets and sell city as­sets to cover pen­sion or re­tiree health care costs.

House Mi­nor­ity Leader Sam Singh, D-East Lans­ing, said Democrats sup­ported task force rec­om­men­da­tions in­cluded in the fi­nal bills.

“While this is a vic­tory for the men and women who work tire­lessly and make great sac­ri­fices to keep us safe, it also marks the be­gin­ning of an­other im­por­tant fight to en­sure that lo­cal mu­nic­i­pal­i­ties have the tools and fi­nan­cial re­sources they need to head off sim­i­lar chal­lenges in the fu­ture,” he said in a state­ment.

Sny­der spoke to re­porters on Wed­nes­day, ex­press­ing hope leg­is­la­tors could make progress.

“This is an is­sue that doesn’t get bet­ter with time,” the gov­er­nor said. “This is an is­sue that’s only grow­ing in terms of po­ten­tial risk to re­tirees and the lo­cal gov­ern­ment.”

Sny­der de­fended the ini­tial plan to cre­ate three-per­son fi­nan­cial man­age­ment teams un­der the emer­gency man­ager law.

“The idea here is that hope­fully, lo­cal gov­ern­ments can solve the prob­lem with their own em­ploy­ees, with­out it com­ing to state in­ter­ven­tion. That should be the last re­sort, and I think that’s the way it’s de­signed.”

While some lo­cal gov­ern­ments have taken steps to ad­dress loom­ing pen­sion and re­tiree health care costs, they have col­lec­tively com­mit­ted just $3 bil­lion to cover $12 bil­lion in promised ben­e­fits, Trea­surer Nick Khouri said ear­lier this week.

As of July, cities and coun­ties across the state faced a com­bined $7.4 bil­lion in un­funded pen­sion li­a­bil­i­ties and $10.3 bil­lion in un­funded re­tiree health care ben­e­fits, ac­cord­ing to a re­port from the gov­er­nor’s task force.

Re­pub­li­cans ar­gued that com­mu­ni­ties strug­gling to ad­dress those long-term debts could face bankruptcy, which could lead to Dra­co­nian cuts for re­tirees.

Pen­sions are pro­tected by the state con­sti­tu­tion, but re­tiree health care ben­e­fits are not. Un­der a 2005 Michi­gan Supreme Court rul­ing, re­tiree health care ben­e­fits are only guar­an­teed if a pub­lic em­ployer binds it­self con­trac­tu­ally to pro­vide them.

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