Senate can’t get its act together on retirement reform

 

Sen. Phil Pavlov (R-St. Clair) and Sen. Mark Jansen (R-Grand Rapids) tried all day to convince fellow legislators that their plan to shut down the current hybrid system and put all new hires into a defined contribution plan was the logical path to reforming the retirement system.

The new plan also called for a return to retirees paying 20 percent of their premiums instead of the 10 percent the House proposed. And there was no help for paying off the system’s stranded costs caused in part by the privatization of jobs.

Their plan couldn’t get traction with legislators, but then neither did the House’s version (H-3) of SB 1040 which was defeated on a 16-22 vote. The issue now goes to a six-member conference committee appointed by Senate Majority Leader Randy Richardville and House Speaker Jase Bolger.

Every Democrat voted against the bill and was joined by Republican Senators Brandenburg, Colbeck, Hune, Jansen, Jones, Meekhof, Nofs, Pappageorge, Pavlov, and Proos.

Continuing to be at issue is the cost of forcing all new hires into a defined contribution plan. Even Gov. Snyder’s Budget Director John Nixon agrees that the current hybrid plan isn’t as costly as moving the new hires into a 401(k) defined contribution. The House version of the bill calls for a cost analysis before making such a drastic move. Maybe the failure of the House’s version of SB 1040 to pass through the Senate yesterday is finally an example of reason trumping power.

The House version includes increased costs for current employees and retirees; pre-funding of the retirement system and a cap on school district contributions—all measures billed as “cost-saving.” But what’s really going on is a “cost-shifting” on to the backs of current employees, retirees and new hires who are being handed the bill to fix the retirement system’s financial problem they had no part in creating. 

There is pressure from school districts for an overhaul of the retirement system. On Oct. 1, districts will be paying 27 percent for MPSERS—an additional $300 million; they currently are contributing 24 percent.

The Legislature returns Aug. 15 for a one-day session to again take up SB 1040—or some version of it.