Wednesday, February 11, 2009

Retirement Stimulus - Latest News

Below is the latest news regarding the School Employee Retirement Stimulus. As of 8:00 AM, February 11, 2008, there are no new developments. The next step is the draft bill so it can be circulated for co-sponsors and introduced. As soon as we have new information, we will get it out to the entire MEA family.


This morning the MEA, along with a bi-partisan, bi-cameral group of legislators, unveiled a proposal to implement a School Employee Retirement Stimulus (SERS) over the next 18 months. The proposal is to allow school employees who qualify for retirement but who have not chosen to retire an opportunity to retire between the end of the 2008-09 and the 2009-10 school year and receive a multiplier of 2.0% times final average compensation instead of the normal 1.5% multiplier. Under the proposal any savings would be retained by local school districts, not diverted to other State obligations.

Background for this proposal is the fact that the economic downturn is having a devastating effect on the school aid fund, among others. Preliminary estimates of the January Revenue Estimating Conference are that the SAF will face an imbalance of a negative $425 million in 2009-10. That translates to a loss of $73 per pupil for every district in the state. If history is any guide, the actual budget shortfall will be much higher than this preliminary estimate. We also face the loss of thousands of students due to lower birth rates and the severe out-migration of families from Michigan.

These factors will place a heavy burden on school budgets which will be felt at the bargaining table, through staff reductions (either by attrition or actual lay-off), further pressure to outsource and privatize educational support services, increased class sizes and workloads. If the history of the late 1970s and 1980s repeats itself, we could see another "lost generation" of young people who prepare for careers in education only to find a complete dearth of job opportunities in Michigan schools who then leave the state or go into other careers.

These forces have a negative effect on the stability of the pension fund itself. Fewer employees make for more instability in the pension funding.

We have also seen a tendency of school employees who are eligible to retire do so in smaller numbers. This phenomenon seems to be correlated with the economic uncertainty that we all feel.

Under the proposal this morning, the Michigan Public School Employee act would be amended. A window in which to apply for the SERS would be created by law. The proposal is for the window to run from March, 2009 through March, 2010. Eligible employees who take advantage of the proposal would be required to retire between June, 2009 and June, 2010. Those who do so would receive the 2% multiplier when their pensions are calculated.

In addition to MEA President Iris Salters, the following legislators were at the press conference at the Capital this morning: Rep. Fred Miller (D-Mt. Clemens), Sen. Wayne Kuipers (R-Holland), Rep. Barb Byrum (D-Onondaga), Sen. John Gleason (D-Flushing), Sen. Roger Kahn (R-Saginaw), Rep. Rick Jones (R-Grand Ledge), Sen. Bruce Patterson (R-Canton), Sen. Jim Barcia (D-Bay City) Several other legislators have expressed interest/support for the proposal but were unable to attend this morning.


Bills must be drafted and introduced (requests for bill drafting are going in now)
Committees of the House and/or Senate must decide to take them up, hold hearings and report them to the respective legislative bodies.
The full House or the full Senate must act on them
Amend them
Pass them
Send to the other body
The committee of the other body must decide to take them up and report them to the floor.
That body must act on them (same possibilities as #3 above)
The bills go back to the first house to agree to any amendments
If passed by both houses in the same form, then they go to the Governor to sign or to veto.
All of this is to say that no one should be applying to retire now. Likewise, local bargaining strategy should not be changed by this proposal. If and when we successfully pass and have singed into law this proposal, or some variation on it, there will be ample time for everyone to understand what was passed and make retirement decisions and bargaining decisions accordingly.