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Monday, February 01, 2010 Granholm Plan Curbs State Employees' Retirement, Health Benefits
LANSING – Gov. Jennifer Granholm unveiled a reform plan Friday with a major focus on curbing the cost of state employees' retirement and health insurance benefits that, in concert with legislative reform proposals, indicates 2010 could see the long-anticipated reshaping of government. In the first of what she said would be three major speeches in the next three weeks, Governor Jennifer Granholm announced a series of changes that would streamline and cut the cost of state government. Granholm said her plan would save $450 million in state and local costs. Few of the ideas Granholm presented to the Lansing Rotary Club were new, but she said the changes were needed to bring state government better in line with the new economy. The first of the proposals to come out Friday was changes to the state and school retirement systems that would encourage those of retirement age - estimated at 46,000 workers - to step away from government service, but she also joined the call for an end to lifetime retirement health care for legislators and a larger contribution to health care costs for current state government employees. "Government can't be all things to all people," she said. "We've got to focus on what matters most." The governor did not address possible tax changes to raise new revenue. Granholm also called for a two-year budget that she said would allow for better forecasting and would allow legislators, in the off years, to review the effectiveness of tax credits. Granholm did not indicate what specifically would be in her State of the State address Wednesday or her budget presentation on February 11, but said those speeches would continue the focus on reforming how state government operates. One thing state government and schools apparently can no longer be is a paycheck to workers who already qualify for retirement benefits. Granholm said she would propose legislation that would encourage those employees to retire by the end of the fiscal year. If all 7,000 eligible state employees retired, the state would save $87 million the first year and $1.8 billion over the next 10 years. Schools would see $230 million first-year savings if the 39,000 eligible teachers and others stepped aside. The change would have a dual benefit, Granholm said: The state would only replace two-thirds of the state employees who left, and those replacements would mean jobs for younger workers who are now without employment. "That creates new job opportunities for college graduates," she said. "It would also open up thousands of jobs for new teachers." Those who take the retirement would see a small income boost. Their pension would be based on 1.6 percent of earnings rather than 1.5 percent. Those who do not retire would pay under the plan. Those state employees under the defined benefit plan and most school employees (they all have defined benefit) staying on for the new fiscal year would pay 3 percent of their salary into the retirement system. They would also lose the current dental and vision coverage, though they could opt to pay a fee, after they retire, to retain that coverage. The state would also cap benefit service years at 30 beginning in the 2010-11 fiscal year. Any additional service years would be converted to the state's defined contribution system. For teachers hired after the current state fiscal year, their retirement plan would be a combination defined benefit and defined contribution plan. And Granholm said she would seek quick action from the Legislature on the proposal, particularly for the schools. "I would ask the Legislature to act quickly so schools can start up next school year with their new employees," she said. HEALTH CARE: For all state employees staying on after September 30, the state would take 20 percent of their health care premium from their paycheck each period. Granholm said that model of paying for benefits was more in line with private sector benefit plans, in addition to saving the state 21 percent on its insurance costs. Granholm also joined House Speaker Andy Dillon's (D-Redford Twp.) call for the state to provide health coverage to all governmental employees in the state, though her plan would make the change optional. "We also want to open up this health care plan to all Michigan public employees and their families," she said, adding local governments could save by pooling with the state. Some local governments and their unions have argued the state plan would actually cost them more than what they currently offer and have balked at Dillon's plan to essentially require that they use the state plan. Granholm said legislators also have to join the efforts to cut costs by cutting their current paid retirement health care coverage, effective at age 55 as long as they serve six years in the Legislature. "In good times it's tough to defend," Granholm said of the benefit. "In tough times it's indefensible." She noted that the House had already approved legislation that would eliminate the benefit and urged the Senate to follow suit. OTHER PROPOSALS: Granholm said she would continue to push for corrections changes that would ensure more inmates are paroled closer to their earliest release date to cut costs there. "The length of stay for Michigan prisoners needs to be comparable with other states," she said. "Keeping prisoners beyond their parole date doesn't make Michigan a safer place." The plan also would push to save costs, or at least ensure oversight of costs, for local governments. Cities, counties, townships and schools would have to follow the state's model and take bids for any purchase or contract more than $50,000. Local school districts would once again be called on to submit consolidation or service sharing plans to the Department of Education to find ways to reduce duplication and costs. For local governments, Granholm called for changes to the Urban Cooperation Act and to laws requiring arbitration for public safety employee contracts to allow more sharing of services. "We want to protect the rights of employees," she said, while encouraging cooperation between local governments. The state also could save some money if the budget is not ready before local governments begin their fiscal years. Granholm said she would back a proposal by the House Freshman Caucus and some senators that would constitutionally require that the budget be done by July 1. The governor and legislators would stand to have their pay docked for each day after that the budget is not complete. "I think people are sick and tired of a budget process that leads to posturing and stalemates and shutdowns," she said. The budget process also would be an every-other-year ordeal under Granholm's plan. "That will allow us to have longer-term budget projections," she said. She would not have been the first governor to make that proposal. Governor John Engler presented one biennial budget. The Legislature returned him one annual budget. Granholm proposed that during the off year, the Legislature could review tax credits, or so called tax expenditures, to be sure they are still providing the intended benefit. "The tax breaks that are currently baked into the system cost you all $36 billion," she said. "They should be treated like every other expenditure in the budget." Granholm has proposed in nearly every budget she presented that some of the credits be eliminated, but so far the Legislature has agreed to few of those changes. She also is proposing that the Constitution require pay-as-you-go budgeting. Any proposal for a new program or a tax cut would require new taxes or cuts elsewhere to cover the cost of the proposal. And every piece of legislation should include an analysis outlining not only the cost to the state, but also the cost to residents and businesses for its implementation, she said. "There has to be an idea of how we're going to pay for this particular program," she said. Granholm also joined legislative Democrats' call for ending the state's current immunity for pharmaceutical companies whose products have been approved by the U.S. Food and Drug Administration, but to put money in the state's coffers. She said other states have sued drug makers for Medicaid costs related to reactions to their products and she would like Michigan to be able to join that effort. This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
Author: Staff Writer Source: Gongwer News Service
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