(The Center Square) – In the last few weeks of the lame duck session, Michigan Democrat legislators tried to push through a number of expansions to the state pension.
Bills in both the state House and Senate looked to reform the pension systems for public school employees, state police and other specified state employees. All are in various stages of the legislative process, awaiting either passage in the Senate or House.
Some have warned the changes would put the state’s pension at financial risk.
Reason Foundation, a Libertarian think tank that conducts nonpartisan public policy research, predicted in testimony before the House that House Bill 6061 would “undo decades of progress in public pension stewardship by reopening an underfunded legacy pension system and eliminating the current defined contribution retirement plan.”
In doing so, Reason Foundation said that transition could potentially inflate the state employee retirement services plan’s unfunded liabilities from its current $5.4 billion to “well over $8 billion over the next 15 years.”
Proponents of the legislation argue the transition back to a more traditional pension plan could boost hiring. State Rep. Matt Koleszar, who co-sponsored House Bill 6061, is one of those.
“We have suffered from a massive teacher shortage and one of the biggest reasons is we don’t have a good retirement system for teachers,” Koleszar said.
House Bill 6060 also dealt with state pensions. First introduced in November, it successfully passed the House and has moved onto the Senate for consideration, while House Bill 6061 remains in the House, having not yet been voted on. No House Republicans voted on the legislation, having previously left the session in protest against Democrats pushing through bills in the final days of the session.
House Bill 6060 deals specifically with the Public School Employees Retirement Act, allowing newly-hired employees and current employees to opt into a defined benefit plan.
House Bill 6061 would amend the State Employees’ Retirement Act to automatically enroll newly-hired employees into a defined benefit plan, while also allowing current employees to transition to the plan.
Previously, this plan was only available to employees hired before 1997, when the state transitioned to using defined contribution plans to help address public pension funding issues.
“HB 6061 would undo a nearly 30-year-old pension reform that has been working effectively to manage financial risks and personnel costs for state agency employers and which has helped taxpayers avoid billions of dollars in additional unfunded liabilities,” said testimony presented to the House by the Pension Integrity Project, a part of the Reason Foundation.
A legislative analysis of the House legislation conducted by the House Fiscal Agency said it anticipates “increased costs” associated with the passage of the legislation.
It is unclear if House Bill 6061 will have the votes to successfully pass the House in the upcoming session, when Republicans take power.
The Senate also passed a package of bills in December which would propose significant changes to the Michigan State Employees’ Retirement System and State Police Retirement System. That legislation is awaiting a vote in the House.
A bill analysis of the Senate legislation conducted by the Senate Fiscal Agency found that on top of Michigan’s current $49 billion worth of unfunded pension liabilities to pay off, “other unfunded liabilities could accrue in the future if actual conditions failed to meet actuarial assumptions…but future liabilities are not known, assumed, or calculated in this analysis.”
The Pension Integrity Project predicts that this expansion could cost an additional $800 million to $1.85 billion over the next 30 years.
