House Appropriations passes SB 1040--with more changes

SB 1040 is on its way to the full House after the House Appropriations Committee reported it out on a party-line vote of 17-10 with some important changes. The H-2 substitute approved today revised the previous H-1 substitute that was discussed by Committee members yesterday.

Not surprising, a major change benefits charter schools who lobbied hard to exempt themselves from SB 1040 since so few members participate in the Michigan Public School Employee Retirement System (MPSERS). With H-2, charter schools can continue to pay their MPSERS unfunded liability out of their payroll, while school district costs are shifted to their operating expenditures—a more expensive option that starts with the 2013-14 school year.

It’s interesting that charter schools and their privatization of services is one of the reasons the retirement system is saddled with a $44 billion unfunded liability and “stranded costs.” They claim that they didn’t cause the problems in the retirement system, and shouldn’t be held accountable for fixing them. They are given a break while current and future school employees and retirees—individuals who also didn’t cause the retirement problem—are forced into financial distress.

Some school districts are upset with this change since Gov. Snyder encouraged the privatization of school services as a way of getting more money. Now they say they’re being penalized and forced to pay more into the retirement system—even though they have fewer employees.

Another change allows employees hired after July 1, 2012 to choose between a 401(k) plan with a defined contribution or a hybrid plan. The Senate version automatically moved all new hires into a defined contribution plan.

With approval of H-2, the Office of Retirement will study the cost of health care for retirees in the seven public universities participating in MPSERS—Central Michigan, Eastern Michigan, Ferris State, Lake Superior State, Michigan Technological, Northern Michigan and Western Michigan universities.

Unlike the Senate version, the latest House changes continue to include prefunding of the retirement system and imposing lower increases in employee contributions.

Yesterday, Gov. Snyder and Republican legislative leaders agreed to prefund MPSERS with $130 million for the 2012-13 fiscal year.

Keep up the pressure on Representatives! Tell them SB 1040 is an unfair, short-term fix to a long-term problem. Current and future school employees and retirees should not have to pay the exorbitant price to fix a problem they didn’t create. SB 1040 will hurt students, parents and public education in general. Use these talking points and tell them to vote “NO.”