GOP legislative leaders look to stop accumulating unfunded pension liabilities
By David Eggert
Associated Press
LANSING, Mich. (AP) — Lawmakers on Tuesday advanced parts of a $55 billion spending plan, despite an impasse with Gov. Rick Snyder over teacher pensions that threatens to break majority Republicans’ six-year streak of enacting a budget in June, months before the fiscal year starts.
House-Senate conference panels approved funding for universities and community colleges, after excluding Snyder from “target” spending decisions for the first time in his tenure. Budget bills for the state police and three other state departments won approval last week.
GOP legislative leaders — contending that Michigan must stop accumulating unfunded pension liabilities due to faulty assumptions of payroll growth and other factors — have left in reserve $475 million to cover first-year transition costs of moving from a blended pension-401(k) plan for schools employees to a 401(k)-only system for new workers hired on Oct. 1 or later. Snyder, a Republican, has long opposed the move and says it would be too costly.
Senate Majority Leader Arlan Meekhof declined to say if the full Legislature would pass a budget without Snyder’s involvement, telling The Associated Press last week: “We’re going to make sure that the governor comes along with us. We think it’s that important.”
He also downplayed the importance of enacting the plan in June, which Snyder says is important for K-12 schools and municipalities whose fiscal years begin in July. Meekhof said districts and local governments would know their minimum state funding based on the budget bills being negotiated, with the potential for more if a deal cannot be worked out to close the Michigan Public School Employees Retirement System to new hires.
“We’ve done a lot of heavy lifting with the governor and for the governor. This is a priority for the Legislature and we’d like his help with it as well,” he said of the pension legislation, which has not yet been scheduled for committee testimony.
The higher education budget bills, which were OK’d by six-member House-Senate conference committees, would boost aggregate funding by 2 percent for 15 universities and 1 percent for 28 community colleges, with increases varying by school. Universities would get their full aid if they limit tuition and fee hikes to no more than 3.8 percent.
Funding for five of the 15 universities would remain below levels from seven years ago, prompting Democratic Sen. Curtis Hertel Jr. of East Lansing to cast the lone no vote.
“I’m going to oppose any budget that continues to do that,” he said, contending that the state has been “underfunding higher education and failing students for 30 years.”
Sen. Tonya Schuitmaker, a Lawton Republican who chairs the Senate’s higher education appropriation subcommittee, said she still hopes to move closer to Snyder’s budget proposal depending on how higher-level talks go — which would give universities 2.5 percent more overall.
“At least this is a good start. This does bring us back aggregately to prior to 2011 levels,” she said.
House Speaker Tom Leonard told the AP that his goal is still to go “seven for seven” and finalize the budget in June before the fiscal year starts in October. But time is running short and it is unclear if enough House and Senate Republicans would back the pension switch, especially with Snyder in opposition.
The House is scheduled to break for the summer next week or the following week before resuming a full schedule after Labor Day — with one session day scheduled each month in July and August. The Senate is tentatively set to recess next week.
“We’re on track. We’re going to continue to march forward,” Leonard said.
State budget director Al Pscholka said Monday that the Snyder administration has had “very little input” as legislators craft the budget. Snyder and GOP legislative leaders met Wednesday. Pscholka said he understands why lawmakers would “hold the budget a little bit hostage” to make a policy change, but that Snyder is right to be concerned about adding at least $400 million to $500 million in annual retirement spending to halt pensions for new school workers.
The budget already will be squeezed by more road funding commitments and tax cuts on business equipment and car sales, Pscholka said.
“I’m not sure where the money would come from,” he said.
Pscholka said the four smaller, uncontroversial budget bills that were finalized last week look “pretty promising,” but administration officials want to see bigger budgets affecting social services, schools and prisons.
