LANSING, MICH. - With few votes to spare, the Michigan Senate and House of Representatives passed bills Thursday that will change the way teachers and public school employees get their retirement benefits.
The 21-17 vote in the Senate and the 55-52 vote in the House came after nearly all of the 11 Democrats in the Senate spoke in passionate opposition to the plan as yet another Republican attack on the teaching profession.
“Every single bill that comes out of this chamber is a direct assault on their profession,” said Sen. David Knezek, D-Dearborn Heights. “We do not value education in the state of Michigan. And we sure as hell don’t appreciate the people who stand in the front of the classroom every day.”
And Sen. Coleman Young II, said the profession of teaching is too important to allow politics to dictate policy.
“This is about the future of our state. It’s about the people who mold the minds of the most precious assets in the state,” he said. “And to treat them in this cavalier, reckless regard is beneath the state of Michigan.”
But Sen. Phil Pavlov, R-St. Clair, who sponsored the bill said it protects the pensions of current teachers and provides options for new public school employees who will be able to have more of a say about their own retirement benefits.
“I can’t help but think that I haven’t done the proper job of educating people,” he said. “We looked at many, many variables that not only affects retirees, we’ve gone over every single line with Treasury, with the ORS (Office of Retirement Services) and what we have in front of you is the best compromise that we’ve been able to get, and it goes a little bit further.”
And Rep. Chris Afendoulis, R-Grand Rapids Township, said the state has got to begin dealing with the $29 billion unfunded liability in the teacher pension system.
"These long term liabilities hang like a sword of Damocles over our heads," he said. "We must address this problem and this is a good start."
Under the bills:
- All new teachers and school employees hired after Feb. 1, 2018, would automatically be placed into a defined contribution retirement plan. The plan would have the school district pay 4% of the employee’s salary into a 401(k) plan. The employee could also contribute and the state would match up to 3% of the employee’s contribution. The current 401(k) plan that about 20% of new school employees are enrolled in has a 3% employer match. Those employees in the current 401(k) would begin getting the better benefits on Oct. 1.
- The state would close the current hybrid system that is a combination of pension and 401(k) and replace it with a new system that would be more costly for the employee and would be closed by the state if it wasn’t at least 85% funded for two years in a row. This plan would also require that if there were unfunded liabilities in the new hybrid system that there would be a 50-50 share of the costs between the employee and the employer.
- A $5-million appropriation was added to the reform legislation to pay for transition costs to the new retirement plans. But that money also makes the bill immune from a referendum to repeal the measure by voters.
- Democrats tried to get amendments passed to the bills that would do away with the 50-50 cost share and the 85% funding threshold, claiming those provisions doomed the hybrid pension system to failure.
They also wanted the $5 million appropriation removed, because it was a transparent ploy to avoid a vote by the people against the measure.
“We know why it’s there. Let’s not lie to each other,” said Sen. Curtis Hertel, D-East Lansing. “The only reason to add this is to go around voters and make it referendum proof.”
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