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Posted by: POLC Staff Posted date: December 4, 2016


By:  Peter P. Sudnick, POLC Legal Counsel

The assault on public sector collective bargaining and negotiated benefits continues with the introduction last week of House Bill 6074, and related bills.  If passed, these bills would create the Local Unit of Government Retirement Act designed to do the following:

  1. Eliminate altogether retiree health benefits for local government employees, including police and fire employees, hired on or after May 1, 2017. The Act would allow, but does not mandate, a local unit of government to contribute not more than 2% of an employee’s base pay to an appropriate tax-deferred account as the member’s retirement health benefit.  The bill does not address the right of an employee to also contribute to the account, but it is presumed that such a right would exist to the extent allowed by applicable federal and state laws.  The bill specifically prohibits the local unit of government from offering any other retirement health benefit to these members or the members’ dependents.  Presumably, the restriction that extends to dependents will not conflict with 2016 PA 284 that obligates the State of Michigan to provide health care coverage for 60 months for the spouse and dependents of public safety officers who die in the line of duty.
  1. Caps the local government’s obligation for retiree health benefits at 80% of the benefit cost for active employees hired before May 1, 2017 and current retirees where:a. The local government is less than 80% funded for the accrued liabilities of the retiree health system as determined by the most recent actuarial report existing at the time the bill is enacted into law;

    b. The local unit of government, although more than 80% funded at the time the bill is enacted into the law, becomes less than 80% funded for two (2) consecutive years after enactment of the law.

Once a local government is subject to the cap whether at enactment or later because the funding status falls below 80% for two (2) consecutive years, the 80/20 restriction remains intact even where at some later date the funding status improves beyond 80%.

  1. Prohibits, as to active employees hired before May 1, 2017 and current retirees, the local government from paying more than 80% of the cost that is a supplement to reimbursements under Medicare.
  1. Prohibits, as to active employees hired before May 1, 2017 and current retirees, the local government from providing retiree health benefits if the retiree is eligible for health benefits from another employer regardless of the comparable status of those benefits.
  1. Excepts the application of the Retirement Act where a collective bargaining agreement entered into before the date of the Act clearly and expressly confers an unalterable right to a retirement health benefit for a fixed duration. As interpreted, the duration can be a number of years even if those years exceed the term of the collective bargaining agreement or otherwise continues for the life of the retiree.
  1. Prohibits the local government from circumventing the requirements and restrictions of the Retirement Act by entering into any agreement that conflicts with the Retirement Act, offering benefits other than those allowed by the Retirement Act, and also provides for injunctive relief and civil fines for violation of the Retirement Act by a local government.
  1. The related package of bills augment the principal bill (H.B. 6074) by: (1) requiring each retirement system to submit a summary annual report and for the Treasury to create and post an executive summary of each annual report (H.B. 6075); (2) making retiree health care benefits a prohibited subject of bargaining under PERA after January 1, 2017 (H.B. 6077) and further prohibiting an Act 312 panel from adopting an offer that would infringe on an employer’s right under the Retirement Act (H.B. 6076 and 6077).  The remaining House Bills would amend various related public acts to conform with the Retirement Act (H.B.s 6078-6086).

House Bill 6074, and related bills, reflect an effort by republican legislators to apply a “one size fits all” solution to the issue of OPEB liabilities that advances the “pro-business” priorities and targets of the West Michigan Policy Forum steered and influenced by the powerful DeVos family.  These bills ignore the efforts over the past twenty years of numerous communities that, with the cooperation of local police unions, have addressed health care costs and will penalize active and retired members even where those efforts have achieved success.  It was disconcerting, even reprehensible, that these bills were introduced by Representative Kevin Cotter, and others, during the lame duck session and during a time when officers throughout the states were paying their respect and offering tribute to fallen Officer Collin Rose who was killed tragically in the line of duty.  These bills cover complicated subject matter and they deserve more than the faint attention that is possible during a lame duck session.

The proposed bills make a 20% retiree contribution a certainty for active employees and current retirees because of the 80% funded requirement.  Less than a handful of communities can satisfy that requirement and those that can have simply swapped one liability for another by issuing bonds in accordance with PA 329 that amended the Revised Municipal Finance Act.  Moreover, the proposed bills shift the burden of OPEB liability to members while legislators ignore, as though non-existent, the seven billion in state cuts to municipal revenue sharing over the last several years and the need to address the Headlee Amendment.  Also forgotten is the fact that retiree changes to health care impact earned contract benefits that exist in many cases because of concessions by unions, including years of 0% wage increases.  Finally, it is apparent that these bills are part of a continued attack on the bargaining rights of public sector employees by reshaping the Public Employment Relations Act from a tool that protects bargaining rights to one that takes those rights away.

These bills are currently before the House Local Government Committee chaired by Republican Lee Chatfield.  Committee hearings on these bills commenced late last Thursday, December 1, 2016.  Several groups in opposition to the bills were heard from last Thursday, but the hearing was adjourned until Tuesday, December 6, 2016.  POLC Director Rob Figurski will be in attendance along with MAPO and Warren Police Officers Association President, Mike Sauger, together with other police groups, to oppose the bill.  They will also be available for testimony.  A rally of union labor groups, including the POLC, will take place on the steps of the capitol building in Lansing at 9:00 a.m.  This is a time when all police union groups need to be actively involved in opposing these bills.  The POLC urges its members that can be present to attend the rally.  Members will be receiving information about the rally together with the names and contact information for the legislative members of the Local Government Committee.  Please make your opposition known to the Committee and your local legislative representatives.  It is important that these bills do not make it out of Committee during the lame duck session and otherwise defeated should they later come to the House for a vote.



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