Senate passes SB 1040

On a 20-18 vote, the Senate passed SB 1040 today stripping new hires of a retirement and forcing them into a defined contribution plan. The bill also puts merit pay back into final average compensation calculations. Other changes previously reported remain in the bill.

All Senate Democrats voted “no,” along with Republican Sen. Casperson, Green, Hansen, Jones, Nofs and Rocca.

An amendment by Sen. Jansen’s (R-Grand Rapids) puts all new public school employees hired after July 1, 2012 into a 401k contribution plan that is similar to what state employees have. He praised his own work saying that this Legislature will be known as the one that “fixed an unending nightmare” of a retirement system with a $45 billion unfunded liability.

However, the “unending nightmare” of a relentless attack on school employees that adds retirement costs to their already shrinking wages and benefits and taxes senior citizen pensions continues.

There was no change for current employees who will be paying 5 percent if they are in the basic plan and 8 percent if they are in MIP. To avoid the higher costs in the future, employees can take a smaller multiplier or move into a 401K plan. An effective date of July 31, 2012 and the elimination of the graded premium and age limit to receive health benefits are still a part of SB 1040.

Retirees will see their health insurance premiums double since SB 1040 burdens them with a 20 percent cost—up from the current 10 percent.

Legislators completely ignored the advice of Gary Olson, the former Senate Fiscal Agency Director and author of a study released by the Coalition for Secure Retirement (CSR) which advised legislators to move slowly on SB 1040. In his study, Olson explains why MPSERS is having financial problems and details the devastating financial impact the bill will have on current employees and retirees.

None of the amendments offered by Democrats to prefund the system—as the Governor proposed, or exempt retirees and employees earning less than $15,000 from additional costs passed. The changes were met with objection by SB 1040’s author Sen. Kahn (R-Saginaw) who dismissed them as not having gone through proper channels before being introduced on the floor and for not including cost estimates.
And Sen. Jansen (R-Grand Rapids) reminded legislators that low income subsidies were available for retirees.

Republican amendments had little trouble passing.

An amendment by Sen. Colbeck (R-Canton) allowing merit pay to figure into a school employees’ final average compensation was unanimously approved. It seems logic prevailed since this Legislature has strongly supported merit pay and now it carries some weight in a person’s wallet.

And in an example of not letting facts get in the way, SB 1040 calls for a 12-month study that reviews the cost of retired university employees to the health care portion of MPSERS. Another amendment calls for a five-year projection of payroll contributions from the state.

Republicans continued to call passage of SB 1040 an “historic change” since they’re “providing hope to teachers, students, parents and future generations.” For now, the only hope for school employees is a bridge card to help support their families!

The bill now moves to the House where more changes are expected. Start contacting your Representatives NOW and tell them to vote NO! As it is now, SB 1040 doesn’t keep retirement promises to current employees; discourages new employees from ever joining the profession; and burdens retirees with more unexpected costs.