June 21, 2024 | This Week in Government: Senate Moves MPSERS Bill as Budget Negotiations Continue

Senate Democrats pushed through a vehicle bill Thursday in line with the governor’s proposal for diverting money from the state’s contribution to the other post-employment benefits portion of the teacher retirement fund as negotiations on an education budget continue.

Passing 20-17 along party lines was an amended version of SB 911, which would adjust the state’s contribution for the other post-employment benefits portion of the Michigan Public Schools Employees Retirement System so it can be diverted to other School Aid Fund priorities.

Also included in the S-1 substitute version of SB 911 was a provision stating that beginning in the fiscal year ending Sept. 30, 2025, and moving forward, those who enrolled in the retirement system prior to Sept. 4, 2012, would not be required to pay the 3 percent of health care costs.

As a multisection bill, amendments to any portion of the Public School Employee Retirement Act are eligible, making it a vehicle bill that could accommodate an eventual agreement.

Thursday’s move in the Senate came as the House was expected to take up legislation that would address teacher benefits, but outstanding questions from the Democratic caucus kept HB 5308 off the board, startling supporters in the public school community.

Sen. Kevin Hertel (D-Saint Clair Shores) told reporters SB 911 does two things: adjusts the floor for the other post-employment benefits side of MPSERS to put more money into classrooms and removes the 3 percent in health care cost some teachers are paying “and put them back in their pocket.”

“This is an important step in getting the budget completed,” Hertel said. “We wanted to show our priorities and make sure we’re putting money back into our classrooms and giving teachers across the state a raise of 3 percent back into their paychecks.”

Sen. Darrin Camilleri (D-Brownstown Township), chair of the Senate Appropriations PreK-12 Subcommittee, told reporters the Senate version of the bill and provisions in the House proposal are still part of the ongoing negotiations.

The question was posed to Camilleri whether the state would be able to access the monies in the proposal if Senate Republicans were to withhold the votes to grant immediate effect on the education budget, which has been alluded to in recent weeks (See Gongwer Michigan Report, May 30, 2024).

“Essentially, the dollars will not get realized until after the budget would take effect regardless of whether or not immediate effect is granted on this bill,” Camilleri said. “We know that with the actuarial accounting practices are a part of this, no matter when the bill is signed, if it has an immediate effect or not, the timeline works out so that the money is unlocked.”

Sen. Thomas Albert (R-Lowell), who helped spearhead the legislation that put the funding floor for the state MPSERS payments in 2017, questioned Camilleri’s assertion in comments to reporters.

Albert also questioned Democrats’ talk of having paid off retirement debt, saying “they’ve artificially divided the debt up into two buckets, retiree health care and pension.”

“We’re still over $30 billion in debt, and they’re acting like we’ve just crossed the finish line,” Albert said. “We’re not even at the start line. I mean, we have a long way to go to finally get out of this.”

Prior to the vote, Senate Minority Leader Aric Nesbitt (R-Porter Township) ripped Democrats for releasing the substitute version of the bill minutes before the vote without committee debate or input.

“This bill will simply raid the teacher pension fund,” Nesbitt said. “The fiscal irresponsibly being exercised by the majority Democratic Party cannot be overstated. This haphazard maneuver will drive us back to the Granholm era, ‘The Lost Decade,’ of racking up debt and sticking future generations with the bill, but that seems par for the course.”

Senate Majority Leader Winnie Brinks (D-Grand Rapids) countered by calling the Republican remarks political theater.

“This bill actually puts money back in schools and it gives teachers a raise. That’s it,” Brinks said.

The House bill, sponsored by Rep. Matt Koleszar (D-Plymouth), would amend the Public School Employees Retirement Act to decrease the rate schools must contribute from salaries from 20.96 percent to 13.96 percent and strike the 3 percent teachers are currently required to contribute.

“They can’t, by a budgetary maneuver, simply decide to stop taking that from teachers,” said Amber McCann, press secretary for House Speaker Joe Tate (D-Detroit). “We’ve fully funded OPEB and are still going to fully fund our obligation under MPSERS. That amount of money amounts to about $180 million of the contribution overall that’s going to the students, and so it would essentially restore that money to the teachers.”

The bill, McCann said, aims to protect the dollars that have been going into the School Aid Fund for covering the cost of the program and to relieve the cost on teachers.

Democratic caucus members still have questions about how the $670 million no longer be going into the Other Post-Employment Benefits fund, will be spent McCann said.

“There are still some members who have questions, to be frank, about the $670 million and whether or not it does actually have any direct relationship to SOAR. And there are still some members trying to better understand if the governor wants the $670 million to fully fund her PreK initiative. ‘Is that something I should look closer at and make sure I’m voting the way that I really want to? Or is there something else that I’m missing here,’” McCann said. “There are stakeholders that they’re hearing from, and they want to make sure they can intelligently respond to their concerns.”

School groups have criticized Whitmer’s budget proposal for months, calling instead for the Legislature to continue funding OPEB at the current rate. That, they say, would reduce what school districts spend on retiree health care and mean more money for the classroom.

Several groups tied their opposition to the MPSERS plan to opposition to a proposed economic development package, saying that education is a form of economic development that needs more funding (See Gongwer Michigan Report, June 11, 2024).

Tate said officials are close to reaching an agreement on the K-12, higher education, and community college budgets. A key question in those negotiations is whether the state will divert the $670 million from teacher retirement health costs toward other areas in the budget.

Tate said there have been conversations with various coalitions and stakeholders around MPSERS.

“I think they’ve been going well, and they’ve been productive,” Tate said. “When you’re looking at the school bus, I think we’ll be in a really good place here today or tomorrow.”

“School bus” is legislative lingo for the omnibus education budget that includes K-12 school aid, community colleges and higher education.

As of 5 p.m., Thursday, no agreement had been reached on the K-12 budget or on MPSERS legislation, McCann said.

When asked about the status of budget negotiations and whether he believed the budget could be completed prior to the nonbinding July 1 deadline, Camilleri said: “I sure hope so.”

Peter Spadafore, executive director of the Michigan Alliance for Student Opportunity, said in a statement following the vote on SB 911 that the coalition of traditional public school management and labor backing the Koleszar bill continue their efforts.

“We remain committed to our education coalition’s proposal and will continue working with lawmakers to find a solution that provides financial relief to educators and school districts and frees up much-needed funding for the classroom,” Spadafore said.

Jame Hohman, director of fiscal policy at the Mackinac Center for Public Policy, in a statement said SB 911 would delay the down payment on the teacher retirement debt and diverting $670 million would cost taxpayers an estimated $1.4 billion.

“Lowering the amount of money going into the teacher retirement fund isn’t doing teachers or taxpayers any favors,” Hohman said. “Reducing pension contributions just pushes the debt further down the road, racking up interest and raising costs. The Michigan House should reject this legislation.”

Budget targets are in place for the state departments and agencies, but the education budget targets are still outstanding, Amber McCann, press secretary for House Speaker Joe Tate (D-Detroit), said on Tuesday.

The targets represent an agreement between legislative leadership and the administration of Gov. Gretchen Whitmer on spending levels for each department. The chairs of the Appropriations subcommittees, likely with considerable input from leadership and the administration, are now negotiating final spending levels for the 2024-25 fiscal year in their budgets.

But conversations remain ongoing about Whitmer’s proposal to reduce by $670 million how much the state pays into retiree health care for public school employees, sources speaking on background said. The governor wants to redirect those funds for the next fiscal year, with the retiree health care portion of the Michigan Public School Employees’ Retirement System set to be fully funded and allocated to other education programs. Virtually the entire universe of groups representing traditional public schools are strongly opposing the move, saying if the state continues its payment levels as-is, that will allow school districts to put less into MPSERS and instead spend more on educating K-12 students.

Sources have also said some department budget targets are “heavily stipulated,” with less freedom for members to decide how to spend the money. Appropriations chairs decided on how money would be spent, and some chairs were asked to put funds back into the General Fund.

Thursday, the House is expected to take up several policy bills for votes, and votes on the budget are expected to start next week.

On Tuesday, a notice of intent to discharge was given in the House for a departments and agencies omnibus budget bill (SB 747) and legislation that addresses MPSERS (HB 5803). The MPSERS bill is a multisection one amending the Public School Employee Retirement Act, meaning it would be eligible for amending any section of the statute. Passage of that bill on Thursday would ensure it is eligible for passage in the Senate next week under the constitutional requirement that bills sit in each legislative house for at least five days before passage.

As the time before summer recess ticks away, the House continues to negotiate on the economic development package that would rework the Strategic Outreach Attraction and Reserve Fund.

Bipartisanship is welcome on the package, Amber McCann, press secretary for House Speaker Joe Tate (D-Detroit), said, but she declined to say whether Republican votes would be necessary to get HB 5768, HB 5769, and HB 5770 over the finish line. Several Democrats have vowed opposition and any Democratic no votes means the legislation must have an equivalent number of Republican yes votes to pass.

“There is an appetite to continue economic development in both the Senate and the House,” McCann said. “The conversation around economic development is ongoing. The speaker is supportive of the plan that we have seen here in the House.”

There is still concern that money in the package will be spent disproportionately in southeast Michigan, sources said.

A letter signed by Rep. John Roth (R-Interlochen) and Rep. David Martin (R-Davison) on Tuesday outlined several changes the Republican caucus would like to see to the bill package.

“Based on extensive discussions with Leader Matt Hall and other House Republicans, we have compiled a list of necessary changes that must be addressed before we can consider supporting these bills,” the letter said. “These adjustments are essential to ensure the SOAR program promotes sustainable economic growth and uses people’s tax dollars wisely,”

The changes included maintaining the full annual MPSERS payment in the public school employees’ retirement system for health care and putting 60 percent of economic development funding into job providers that are already established in Michigan. Gov. Gretchen Whitmer has proposed reducing the state’s payment to MPSERS for retiree health care by $670 million.

School funding continues to be a concern in both the Republican and Democratic caucus, but Democrats may put forward legislation to alleviate concerns from the left.

The letter also asked that half of the SOAR deposit should go to the Strategic Site Readiness Program and that 60 percent of that funding should be dedicated to building pad-ready sites. Other changes include requiring a roll call vote in both legislative chambers before each SOAR transfer is made and requiring that money paid back due to clawback or other repayment provisions be deposited in the General Fund.

“Incorporating these changes will significantly improve the transparency, accountability and effectiveness on the SOAR program,” the letter said. “Ensuring that funds are used thoughtfully and fairly across the state in a wide variety of industries will foster a more robust and resilient economic environment in Michigan.”

When a House committee reported the SOAR legislation last week, there was some indication from Martin and Roth they were considering voting yes on the floor. The requirements they put forth Tuesday suggest their votes could be a long shot.

Last week, Democrats Rep. Dylan Wegela (D-Garden City) and Rep. Emily Dievendorf (D-Lansing) put out their own letter requesting amendments to the package.

The proposed changes would reduce the amount of funding steered toward the main business incentive fund and increase the Corporate Income Tax. They would also tie bar the plan to provide long-term funding to the SOAR Fund to legislation being rallied by school groups to reduce their payroll contributions toward health care.

McCann said that she didn’t know if there was an appetite to increase the corporate income tax throughout the caucus or the Democratic caucus or the chamber, but it was something that the speaker was willing to discuss.

“We’re not making any promises,” she said.

Broader support for the package continues, with the Urban Core Mayors being the latest organization to sign a letter endorsing the package.

“We believe now is the time for sensible reform and to implement a long-term economic development strategy that collectively meets the needs of people, place, and business. When we consider what is important for the future success of our communities, deploying a 10-year economic development strategy provides the certainty we need when looking to grow our cities,” the joint letter signed by mayors representing urban core communities said. “As mayors, we are committed to working in our communities to provide vibrant, authentic experiences for residents and visitors, access to attainable housing, opportunities for entrepreneurs and small businesses, and robust mobility options. The proposal before the legislature is a historic opportunity to enact a comprehensive, long-term prosperity agenda for our communities, and for that reason, this legislation has our full and enthusiastic support.”

The letter was signed by Grand Rapids Mayor Rosalynn Bliss and co-signed by Kalamazoo Mayor David Anderson, Battle Creek Mayor Mark Behnke, Detroit Mayor Mike Duggan, Pontiac Mayor Tim Greimel, Dearborn Mayor Abdullah Hammoud, Muskegon Mayor Kenneth D. Johnson, Jackson Mayor Daniel Mahoney, Saginaw Mayor Brenda F. Moore, Flint Mayor Sheldon Neeley, Bay City Mayor Kathleen Newsham, Lansing Mayor Andy Schor and Ann Arbor Mayor Christopher Taylor.

Gov. Gretchen Whitmer has also signaled support for moving an economic development plan forward.

“If we are going to continue to outcompete other states for this investment, we need the ability to support both big companies and small startups, invest in urban areas and small towns, attract new businesses and help existing hometown employers grow, and make sure that every Michigander has an opportunity to make it in Michigan,” a statement from Whitmer Press Secretary Stacey LaRouche said. “That’s why the governor supports a comprehensive economic development package that creates good-paying jobs. Michiganders are counting on Democrats and Republicans to come together to get this done and make sure Michigan has a full set of resources to compete for more jobs and investment.”

It remains unclear if the House will be able to pass the package this week.

A bipartisan bill package that would count the passing of prison programs towards “productivity credits” to earn reduced sentences heard testimony from both sponsors and victims of crimes in a Senate panel on Thursday.

These credits in SB 861, SB 862, SB 863, and SB 864 would allow earlier consideration for parole with a capped number of credits, according to testimony in the Senate Civil Rights, Judiciary, and Public Safety Committee.

Some of these programs look like GED programs and vocation programs to have stability post-release.

“Good time” credits, which allowed for good behavior in prison to lead to the release of the prisoner, were abolished with truth-in-sentencing laws in the 1990s, which made certain victims they would know with certainty that someone who attacked them was being released.

One of the questions in the panel from Sen. Jim Runestad (R-White Lake) was the constitutionality of the bill package and whether it would need a three-fourths majority in both legislative houses because it would amend a voter-initiated act. Supporters of the bills have disputed the notion three-fourths majorities would be required.

John Cutler, managing director of state policy and research for the Alliance for Safety and Justice, said there should be no issue of constitutionality because the bill is simply not “good time” credits; they are credits made from specifically passing programs set up for prisoners.

“This has been something that’s been badly needed in our prisons, particularly to do two things,” Sen. Jeff Irwin (D-Ann Arbor) said in testifying for his bill. “One to enhance safety within our prisons, for both adults who work there and for the folks who are incarcerated, but also to create incentives that will encourage prisoners to develop themselves, earn new skills, and be in a position to be more successful when they get out.”

The bills would not be retroactive, only dealing with new crimes, and would not be offered to criminals convicted of murder, human trafficking, or sex offenses.

The Parole Board would also oversee the final decision-making process.

Still, law enforcement and Attorney General Dana Nessel are among the key opponents of the legislation. The House has considered similar legislation.

One of the main supporters of the bill was members of Crime Survivors for Safety and Justice, saying they supported the bill because victims would be informed every step of the way and would not continue the cycle of bad behavior after getting out of prison.

Priscilla Bordayo is a state manager for the crime survivors’ organization and a survivor herself. She said the common thread among all survivors is that they never want it to happen to anyone else, and she believes these bills will make Michigan safer.

She told a story about her cousin being killed in a drive-by shooting and her uncle having to answer to a Parole Board hearing about the man who killed his daughter.

“My uncle, her father, responded to his possible release by asking a simple question: is he a changed man?” Bordayo said. “That’s what he cared most about. He knew that if the defendant had redeemed himself in his debt to society, we would all be better off and safer. Redemption and rehabilitation are the foundation for safety.”

Forty other states have these standards for prisoners. Gary Mohr, the former director of the Ohio Department of Rehabilitation and Correction, studied the effects of productivity credits in his own state for three years, seeing that those who completed programs including mental health programs had less violence while in prison and a reduced recidivism rate.

“If we can invest our programs and staff to deliver programs that reduce that opportunity to people that have already committed felonies, then we have a significant opportunity to reduce the crime rate based on that population,” Mohr said.

A shouting match broke out on the House floor Thursday after Republicans were denied the opportunity to speak on HB 5579, legislation that would allow Grosse Ile Township to buy a bridge and to charge a user fee.

The bill is permissive only and does not have a direct fiscal impact on the state or local units of government generally. The population thresholds included in House Bill 5779 would limit the applicability of the bill to Grosse Ile Township.

According to committee testimony, Grosse Ile Township is looking to acquire and then operate the Grosse Ile Toll Bridge, which is owned by the Grosse Ile Bridge Company. During the committee meeting, township officials indicated that the intention was to finance bridge purchase, maintenance, and operating costs through tolls.

“We’re empowering the community to take control of vital transportation,” bill sponsor Rep. Jaime Churches (D-Wyandotte) said during a floor speech. “This legislation means money and tools for Grosse Isle township to maintain this bridge.”

Republicans wanted Rep. Timmy Beson (R-Bay City) to be able to speak to the bill because Bay City has a bridge, Liberty Bridge, where a toll has been imposed, and Beson said it has negatively affected businesses.

“If you don’t do it right with the bridge authority like you’re supposed to, they’re going to do the same thing that they did in Bay City, where a private company comes in and takes it over and decides what the new tolls are,” he said. “We’ve got to do it right. We can’t just keep amending it to fix the problem right now and not thinking a year, three years down the line.”

The vote dissolved into a spat between Minority Floor Leader Bryan Posthumus (R-Cannon Township), Rep. Andrew Fink (R-Hillsdale), Rep. Tom Kunse (R-Clare), and Majority Floor Leader Abraham Aiyash (D-Hamtramck) on the protocol of allowing floor speeches.

“We have an established order in the Michigan House in which every single day before we start the floor session, we are told to be given a list of speakers that they want on each respective bill,” Aiyash said. “We do our best to accommodate for parity and to make sure that we are balancing the time … this was a last-minute attempt to add a speaker to the list simply to play theatrics.”

Posthumus said that Republicans notified Democrats 45 minutes ahead of the bill coming up during the session.

“Several times, they’ve added speakers over the last year and a half. Several times when we were in the majority, they’ve added speakers at the last minute in an attempt to get something done,” he said. “We were not getting a single opportunity to dissent on this issue.”

Aiyash went on to say that the Republican caucus knew that the House needed to be done by 4 p.m. on Thursday and was attempting to drag out session and stall.

The vote passed 56-25, with most Republicans not on the board.

The House also passed HB 4177, which gives voters in Wayne County the chance to decide on a new millage to create the History Museum Authorities Act.

If voters pass the measure on the ballot, the Detroit Historical Society — which operates the Detroit Historical Museum and the Dossin Great Lakes Museum — and the Charles H. Wright Museum of African American History will be able to receive funding, much like the existing millage that provides funding to the Detroit Institute of Arts and the Detroit Zoo.

Rep. Thomas Kuhn (R-Troy) spoke in opposition to the bill, saying that the public would have no means of seeing how their dollars were being spent.

“I love history, and I love historical museums, but I don’t love this bill,” Kuhn (R-Troy) said during a floor speech.

Rep. Tyrone Carter (D-Detroit), the bill sponsor, said that the legislation would bring sustainable funding to the museums that other cultural resources already enjoy.

“These cultural resources in our community deserve sustainable funding support. With this legislation, residents can enjoy the perks and access to the museums,” Carter said. “HB 4177 will let voters decides how to distribute resource for funding and support the greater participation of all historical museums that residents and visitors enjoy.”

The House also passed SB 555, which adds residency requirements for members appointed to promise zone authority boards, expands the definition of student success programming, and clarifies the definition of administrative costs.

The bill passed 57-52, with Rep. Joseph Fox (R-Fremont) voting with the majority.