Lansing Michigan House panel changes teacher benefits bill Makes changes less onerous

By Kathy Barks Hoffman Associated Press LANSING, Mich. (AP) -- New teachers in Michigan would continue to get hybrid pensions and the state would use more money from the school aid fund to pay down future school employee retirement costs under changes made Monday to a school employee benefits bill. The Republican-led state Senate passed a bill last week requiring all teachers hired after July 1 to be in a defined contribution system giving them money toward a 401(k)-style system but no defined benefit pension. The nonpartisan Senate Fiscal Agency estimated it would cost the state $1.4 billion over six years to make the switch. On Monday, the GOP-led House Appropriations Committee introduced a substitute to Senate Bill 1040 that would keep new teachers in a hybrid system that's part defined benefit and part defined contribution plan. Even opponents of the overall bill were happy with the change. The House version also takes steps to make the changes less onerous on current and retired teachers. Although most school employees would continue to pay at least 3 percent of their salary toward retiree health care, they would pay less to keep their current pensions than under the Senate version. Experienced teachers now paying nothing toward their pension costs would have to contribute 4 percent of their salaries under the House substitute, while those paying between 3 percent and 6.4 percent would pay 7 percent. The Senate version had required contributions that were a percentage point higher for each group. Both versions would require retirees to pay 20 percent of their health care premiums starting in January, at least double what they're paying now. New hires wouldn't be eligible for retiree health care coverage and instead be given a match of up to 2 percent to plus a lump sum upon retirement so they could pay for their own health insurance in retirement. Retired and current teachers spoke out against the revised bill during Monday's committee hearing, saying the changes are eroding promises that they would get pensions and health care coverage in retirement. Many teachers already saw their pension contributions increased in 2007 and now will have to pay state income taxes on their pensions under legislation passed last year. The Coalition for Secure Retirement-Michigan has said a lawsuit challenging the pension changes is likely if Republican legislators pass the bill by June 1 as intended. A Detroit Democrat who sits on the House Appropriations Committee expressed disappointment. "Michigan educators have the most important job in our state, and today's attack on their retirement benefits is disgusting," Rep. Rashida Tlaib said in a statement. "First the majority party passed the senior pension tax, and now they want even more from our seniors who retired after decades of service." The House measure would take a far bigger chuck out of the $45.2 billion the state faces in unfunded retirement liabilities than the Senate bill does, reducing them to $29.3 billion. It does that in part by using the 3 percent being collected from teachers to prefund future retiree health care costs, rather than having the money cover current retirees' health care costs. It also would have the state put $130 million from the school aid fund in the fiscal year that starts Oct. 1 toward covering some retirement costs school districts are facing. The move should put more money into the Michigan Public School Employee Retirement System to prefund future costs while reducing costs for individual school districts. The state would have to continue to put in money in upcoming years as well. GOP Gov. Rick Snyder and budget director John Nixon tried working with the Senate to set aside more state money to prefund retirement liabilities, but their efforts were largely rebuffed. The House committee proved more amenable, with Monday's substitute including many of the administration's suggestions. "It's very similar to ... (the) proposal that was being floated," said Senate Fiscal Agency analyst Bethany Wicksall. "The major difference that the House added to that was capping the rate" employers had to pay into the system and spreading the unfunded liability to school districts' total operating costs rather than just total payroll. Published: Wed, May 23, 2012