A Republican-led committee approved bills that would force municipalities to boost funding of employee retirement plans<\/b>
\nLansing \u2013 A Republican-led legislative committee quickly approved bills Tuesday that would force local governments to boost their funding of employee retirement plans over time, an effort supporters say is necessary to prevent financial chaos down the road.
Opponents, however, questioned how the move would affect previously approved union agreements and whether it is necessary to threaten state intervention for recalcitrant municipalities.
The nearly 600 municipalities that offer pensions have unfunded liabilities totaling $7.4 billion, and 180 have funding ratios below 60 percent, according to a task force created by Gov. Rick Snyder. The roughly 340 governments that provide retiree health care have $10.1 billion in unfunded obligations, with average funding ratios of 19 percent.
The legislation won party-line passage in the Senate\u2019s Michigan Competitiveness Committee on the day testimony began. A GOP-controlled House panel could vote later in the day on identical bills. The Snyder administration \u2014 concerned especially about underfunded retiree health care systems \u2014 testified in support. Snyder also briefed GOP lawmakers behind closed doors about the legislation whose future is uncertain in the full Legislature.
\u201cWe have to act now. The later you wait, the harder it is to solve the problem,\u201d said state Treasurer Nick Khouri.
Said Sen. Jim Stamas, a Midland Republican and sponsor of the legislation: \u201cThis isn\u2019t to punish (the communities). This is to try to help make sure we preserve and protect the commitments that they made.\u201d
During a proposed five-stage process, communities with significantly underfunded pension or health care plans would have to submit planned \u201ccorrective actions\u201d to a new Local Government Retirement Stability Board comprised of three gubernatorial appointees. If the board rejects the plan or a local government can\u2019t agree on a proposal \u2014 such as making additional employer contributions, altering benefits, asking voters for a tax increase or not providing retiree health insurance to future workers \u2014 the state treasurer would declare a financial emergency and appoint a three-person team to act as an emergency manager. It would have \u201cbroad powers\u201d to rectify the underfunded status.
A coalition of police and firefighter unions and organizations opposed the bills, which also were criticized by the Republican and Democratic executives in the major Detroit-area counties of Oakland and Macomb. Municipal groups also lodged concerns.
\u201cWe cannot support legislation that impacts the promises made in collective bargaining agreements,\u201d said Midland Fire Chief Chris Coughlin. \u201cThese promises were made, and they need to be kept. The legislation as currently written, jeopardizes those agreements and promised made.\u201d
Initially, a retiree health plan would be deemed inadequately funded if it was not at least 30 percent funded and cost the municipalities more than 10 percent of general fund spending. A pension plan would have to be at least 60 percent funded. The minimum thresholds would rise over time. The treasurer would issue a waiver from an underfunding status if the debt is being adequately addressed.
The bill also would:
\u2014 prohibit municipalities from reopening pension or retiree health plans if they have been closed as of July 1,2018.
\u2014 bar pension benefits for those elected or appointed to office after June 30,2018, if they are new to the system.
\u2014 require local governments to fully prefund ongoing health costs by mid-2023, which is already required for pension plans. Such \u201cnormal\u201d costs equal the amount of money needed to pay for that year\u2019s benefits that are earned.
Online:
House Bills 5298-5313
Senate Bills 686-701<\/p>\n

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