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Legislature approves changes for teachers
By JEFF KAROUB, Associated Press
LANSING, August 15, 2012 (AP): Newly hired Michigan public
school employees would pay more for their pensions and no longer
receive state-provided health coverage in retirement under
legislation approved Wednesday and headed to Republican Gov.
Rick Snyder’s desk.
The Republican-controlled state Senate and House approved a
measure that officials say would cut more than $15 billion from
a $45 billion liability on the Michigan Public School
Employees Retirement System. The reductions include a $130
million contribution by the state toward retirement costs.
That funding, along with the 3 percent contributions school
employees are required to make, would significantly decrease the
retirement system's shortfall. Also under the bill, new public
school hires would get a match of up to 2 percent plus a lump
sum upon retirement to pay for health insurance. Retired
employees covered by state-provided insurance would pay at least
20 percent of their premiums.
Still, the measure does not take another step favored by some in
the Republican majority and a centerpiece of previously passed
Senate legislation: scrapping pensions for new hires and pushing
them into a 401 (k)-style retirement plan.
The measure calls for a third-party group to conduct a study due
by Nov. 15 that would determine, among other things, the cost of
ending pensions. Some lawmakers and Snyder administration
officials have argued such a plan would cost billions to
implement.
Republicans have said the point of the legislation is to save
the retirement system, adding that legacy costs could put the
whole thing in jeopardy. Democratic lawmakers have echoed
concerns raised by retired and current teachers, arguing the
changes erode promises of pensions and health care coverage in
retirement. Many teachers already saw their personal pension
contributions increased in 2007, and now will have to pay state
income taxes on their pensions under legislation passed last
year.
The retirement system has 444,185 members, including 192,435
retirees.
Senate Majority Leader Randy Richardville said the
legislation isn't perfect, but it was important to carefully
examine the financial impact of switching to a defined
contribution plan and pass the health care piece of it now.
That, he said, sends a signal to Wall Street that Michigan is
taking care of its economic problems.
``This is a big step for financial accountability,'' he said.
It also ends some uncertainty that had been facing local school
districts as they tried to set their budgets for the upcoming
school year.
``At long last, Michigan's school leaders can move forward on
educational initiatives without the negative budget impact of
steeply rising retirement costs,'' William Mayes,
executive director of the Michigan Association of School
Administrators, said in a statement.
House Democratic Leader Richard Hammel said in a release
that Wednesday's actions ``hurt middle-class families by
short-changing teachers and making it harder for them to provide
for their families.''
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