House takes up OPEB reform package

retirementIn an effort to address the more than $11 billion in unfunded accrued OPEB (Other Post-Employment Benefits) liabilities for local governments across Michigan, the House is reviewing a package of bills aimed at changing the insurance benefits for government retirees. The 13-bill package, put forth by Speaker Kevin Cotter (R-Isabella), creates the Local Government Retirement Act and amends all the relevant statutes to require compliance with the main bill, House Bill 6074.

Of Michigan’s 83 counties, 26 do not offer OPEB, while another six are currently at least 80 percent funded in the benefits, which would make them exempt from some of the requirements in the act. The remaining 51 counties have an accumulated unfunded liability of approximately $3 billion.

Breakdown of counties by OPEB commitments
(Updated 1/3/17 with corrected figures for Livingston County)

The six counties above the 80 percent mark — Barry, Cass, Clinton, Macomb, Oakland, Ottawa — would be exempt from the changes to current employee and current retiree OPEB benefits, regardless of whether or not the employees are currently vested in the benefit. These counties, however, would still be subject to the provisions for Medicare eligible retirees, Medicare supplemental policy contributions and for all new hires as detailed below.

The main provisions of the package include:

  • Requires an “unvested” retiree to contribute a minimum of 20 percent toward the cost for post-employment insurance and caps a local government’s contribution to a maximum of 80 percent.
  • Limits local governments’ contributions toward OPEB benefits for all new hires to a maximum of 2 percent of the employee’s base pay.
  • Requires all retirees to be on Medicare when eligible.
  • Caps local government contributions to Medicare supplemental policies to 80 percent of the cost of the policy.
  • Prohibits a local government, regardless of whether or not it meets the 80 percent funded threshold, from providing insurance benefits to retirees who are eligible to participate in a medical benefit plan or retirement health benefit plan offered or provided by an employer other than the local government.
  • Directs that “vested” employees will be exempt from changes in the act. To determine whether or not an employee is vested/exempt, the package states that if a collective bargaining agreement entered into before act’s adoption clearly and expressly confers a fixed, unalterable right to a vested retirement health benefit for an unambiguous duration, then the act does not impair that vested retirement health benefit for that duration.

After consulting with the Executive Committee of MAC’s Board of Directors and several county administrators, MAC took the position of “support in concept” and testified before the House Local Government Committee on that theme on Dec. 1. MAC noted in its testimony our appreciation for providing local governments with some assistance in tackling this looming obligation by taking this issue off of the bargaining table and for the state diverting legal challenges to the proposed law from the local governments that seek to amend the benefits for unvested employees and retirees.

MAC also conveyed concerns with the approach, including:

  • Many Michigan counties already have acted to change these benefits for current employees and for new hires. This should be recognized by the state.
  • Local control has been, and continues to be, a vital component of good governance, but the state needs to “untie the hands of the county so they have the tools necessary to address the issues.”
  • This approach focuses only on fixing local government budgetary issues by going after the costs associated with the employees that provide the public services we all rely upon. MAC would like to see the Legislature actually address the revenue side of the equation.

In addition to the concerns outlined above, MAC will be working with the Legislature on language changes and certain provisions that need to be addressed for specific counties. We anticipate additional hearings next week. For more information, contact Deena Bosworth at Bosworth@micounties.org

Road impasse has cost state $270 million, and counting

calculator imageThe Legislature’s refusal to fund new investments in infrastructure has cost Michigan taxpayers more than $270 million since June 12 of this year, says a coalition committed to road funding reform.

The Just Fix the Roads Coalition unveiled a calculator widget that shows how much inaction has cost residents.

“’As each day passes, that figure climbs by $2.7 million, or $1 billion per year. Faced with that cost of delay, Michigan’s legislators must find a way to invest at least $2 billion more annually on roads, or the public will continue to bear the brunt of their inaction. As legislators continue to put off road funding, the cost of repairs will escalate even further. It is a major funding dilemma that will only get worse over time,” said Mike Nystrom, executive vice president of Michigan Infrastructure and Transportation Association, a member of the coalition, along with MAC and many others.

Call to Action on Revenue Sharing

Projected revenues for FY 2014 – 2015 are anticipated to be $253.2 million less revenue than originally anticipated.  This projection is what the legislature and administration will use to determine target numbers for the various budgets for the coming year.  As most of you are aware, the governor, along with the House and Senate have recommended full funding for county revenue sharing.  It is critical that you contact your representative and senators and ask them to keep full funding for counties when determining appropriation line items for the upcoming budget.  Attached are talking points for your use.  Please contact MAC is you have any questions and if you are successful in contacting your legislators.

Revenue Sharing TP.FY15 [pdf]

You can also find these on the MAC website: micounties.org

State Owes Local Governments; Surplus Will Fund Owed Debt

LANSING, Mich. –With nearly a 1 billion dollar surplus projected, counties see this as the perfect time for the state to make good on its promise to pay back local units of government for their sacrifices to the state’s budget over the last decade.

The state has balanced the budget on the backs of local government by siphoning off more than $6 billion from revenue sharing to local units over the last decade. Counties in particular, have been a selfless partner, saving the state more than a billion dollars since 2005. This budgetary concession was made in an effort to help the state with its budget problems, with the understanding that the state would honor their funding obligations in the future. This promise has not been fully honored and the state continues to short counties by more than 20% each year.

Ignoring the statutory commitment to fund counties at the level required has become a habitual practice for the state. Counties are already stretched to their financial limit, making it difficult for them to pay for the multitude of state mandated services. County services may not be flashy, but they are critical for safe and functional communities. These state mandated services include courts, jails, 911, foster care, sheriffs, elections and the public health system.

“The tide has turned for state revenues and we are thrilled Michigan is turning around,” said the Michigan Association of Counties (M.A.C.) Board of Directors President Shelley Pinkelman. “Unfortunately, local governments are at a disadvantage. Our ability to recover from the recent recession is disproportionately slower than it is for state government and without the state honoring their financial obligations to local units, we will continue to struggle to provide the most basic of local services. It is critical that the legislature recognizes this and honors their statutory obligation to fund local government services.”

The legislature could allocate a mere $40 million to make counties whole in FY 2014.

The current model of mandating counties to deliver services on behalf of the state government without paying for those services is unsustainable. After nearly a decade of the state shirking their financial responsibility to local governments, the time to repay is now.

 

Landline Elimination Bill

The Michigan legislature is on the verge of sending SB 636 to the governor that will take away the authority of the Michigan Public Service Commission (MPSC) to oversee the discontinuance of basic landline telephone service and instead places that authority with the Federal Communications Commission (FCC) who has not been in the business of regulating Michigan telephone service.

MAC, along with AARP, Law Enforcement, 911 Service providers and others oppose the bill for the following reasons:

  • The elimination of the requirement to provide basic landline service will inhibit the ability of many Michigan residents to call for emergency help.
  • Eliminating landline service and replacing it with Voice Over Internet Protocol (VOIP) and cellular phone coverage is unreliable due to sketchy coverage, extended power outages and the inability of law enforcement to identify the exact location of the caller.
  • The bill calls for comparable and reliable service, but does not ensure comparable cost and will only require landline service if a consumer files a complaint with the MPSC. This places a significant burden on the consumer who likely does not know who the MPSC is nor how to file a complaint with them.
  • VOIP, the alternative to home phone landline service, requires a cable running to the house, but the build-out of this technology is not there yet, nor is there any guarantees that this will be completed prior to the discontinuance of landline service.
  • Cellular coverage may be available, but it is not reliable, cannot pinpoint location, and calls are often dropped at inopportune times.
  • There is nothing in the bill that would prohibit the providers from requiring a “bundled” service for access to a VOIP or cellular telephone line.
  • 911 service providers cannot access critical information about a call if it comes from a VOIP line or a cellular line.  Traditional land lines convey information about medical equipment, special needs children in the home, elderly in the home, and the like.
  • Michigan already has a statute that provides for a process for the landline provider to get out of providing the service, but the proponent of this legislation wants to avoid those requirements and skip Michigan’s oversight in favor of a further removed federal body.

Please contact your State Representative and ask them to put public safety first and vote no on SB 636.

Landline Elimination Information Maps: SB 636 MPSC Slides