Capitol News

January 2012

The Legislature adjourned for the year on December 15 with a flurry of last minute activity on high priority items. It returned January 11, 2012 with the good news that there may be a billion dollar surplus for FY2011. So maybe those cuts to education and imposition of the pension tax were really not needed to finance abolishing the Michigan Business Tax?

Pension Tax Update

Fall-out from the new Michigan pension tax continues. No lawsuit has been filed as yet to enjoin the tax from taking effect on January 1, 2012, for those with Michigan residency.

The Office of Retirement Services has implemented withholding of 4.35% of your pension unless you were born before 1946. For all others, ORS will withhold 4.35% based on the number of exemptions you requested for your federal income tax, unless you go into MiAccount and change your withholding. Those of you born from 1946 through 1952 especially need to go into MiAccount to adjust your withholding because the formula in the ORS withholding feature doesn’t take into account that you are getting a state income tax exemption on your pension of $20,000 single/$40,000 couple filing jointly until you turn 67 and then the exemption is on your total household resources. Don’t forget that there are other subtractions, deductions, and exemption going away for tax year 2012 that will affect everyone, regardless of age. If you are utterly confused by all of this, ask your tax preparer for advice pronto so that you withhold just the right amount and do not face a big tax bite in the spring of 2013.

Capitol observers and pundits are watching for retiree backlash. Those who passed the massive tax shift from businesses to individuals are hoping pensioners will experience memory loss earlier than usual. That isn’t likely as each month we will get a reminder in our bank account deposit and each year we will be reminded at tax time. Keep writing letters to the editor and talking about the unfairness of the pension tax with your retiree friends. Attend your legislators’ town hall meetings or write to them and ask if they support the two pension repeal bills, HB 4818 and SB 519. SERA hopes to do candidate surveys so that you are an educated voter in August and November 2012.

Retirement System Overhaul Signed

The Governor has signed HB 4701 (now Public Act 264 of 2011) radically altering the retirement system for active state employees. The changes do not affect current retirees or those who switched to or who are in the Defined Contribution (DC) retirement program. Current defined benefit (DB) active employees need to choose whether to pay 4 percent of salary to remain in the DB pension plan for future service, or to decide to become a participant in the DC plan for future years of service. DB employees must make the choice by 5 p.m. March 2, 2012. Failure to make an election will put DB employees into the DC program. The law takes effect April 1, 2012. More detailed information is on the ORS Web site and has been sent to active employees. Webinars and tutorials are available through the ORS Web site also. Yet many questions remain about the legality of the 4% required contribution since it is very similar to the 3% mandatory retiree health care contribution the lower courts recently struck down. Unions are considering a challenge to the law.

The new law also contains an end to the mandatory health care contribution and refund of the $93 million with interest to those who paid it. Active employees received their refund in a paycheck and eligible retirees will be getting a separate check by February 2 it is reported.

CSC approves labor contracts

At the Civil Service Commission meeting of December 15, the Commission unanimously ratified new contracts with union-represented state employees and approved pay for non-exclusively represented employees as well. The labor contracts call for a 1 percent pay raise in October 2012 and lump-sum payments in 2012 and 2013 that equal 1 percent increases, though the lump-sum payments will not be rolled into base pay. All employees will pay 20 percent health insurance premiums beginning in 2012.

For non-union represented employees, the Commission approved a 3 percent base pay raise and a lump-sum payment equal to 2 percent of their salary, both to take effect October 1, 2012. Unclassified employees, the governor’s appointees like department directors and some who report to them, would receive up to a 1 percent base pay raise and a lump-sum payment equal to up to 1 percent of their salary, also effective October 1, 2012.

Domestic partner benefit update

The Governor has signed HB 4770 banning public employers from providing domestic partner benefits to public employees. There is some question about whether the law applies to university employees, but the Governor’s office has stated that it knows it doesn’t apply to state classified employees. The American Civil Liberties Union of Michigan has filed a lawsuit to overturn the law.

The Governor vetoed HB 4771 which would have modified the Public Employee Labor Relations Act to prohibit bargaining about domestic partner benefits. On the same topic, Attorney General Bill Schuette has appealed to the Michigan Supreme Court the Michigan Court of Appeals decision to uphold the Civil Service Commission’s approval of domestic partner benefits for state employees.

Workers’ compensation legislation signed

The Governor has signed HB 5002 to amend numerous sections of the Workers’ Disability Compensation Act giving business groups a major victory. Injured workers are capped at 80 percent of their after-tax wage and their wage-earning capacity is determined by reasonably available, suitable jobs, regardless of whether an injured worker earns those wages or not. Democrats labeled this "phantom wages," but after police and fire fighters won an exemption for themselves in the Senate, the bill was easily passed.

Employers pay the entire cost of workers’ compensation insurance. An insurance industry study has reported that Michigan’s total cost per claim is 35 percent lower than the median of the 16 states studied, and the Department of Licensing and Regulatory Affairs recently announced that the pure premium advisory rates will drop by an average of 7.4 percent next year, calling into question the need for the “reform.”

Unemployment Insurance Amendments (SB 806) signed

The Governor also signed SB 806 making several changes to the Michigan Employment Security Act adding situations which disqualify individuals from UI benefits, adding reporting requirements for those seeking work, and requiring individuals who have received at least half of their benefits to take jobs outside of their training and experience that pay significantly lower wages.

Charter schools legislation signed

The last days of House session before the holiday break saw protracted maneuvering on a bill to make a number of significant amendments to the revised school code concerning authorization of charter schools. The Governor has signed the bill expanding the bodies which can authorize charter schools, removing restrictions on which school districts in which charter schools can be located, stricking down strict quality control measures, and removing the cap on charter schools currently at 150.

The Senate passed the legislation in early October, but to get it through the House, Speaker Jase Bolger made some last-minute changes to the House Education Committee’s membership to remove Republican No votes and replacing them with Republican Yes votes. But the real drama unfolded on the House floor on one of the last days of session in December. The chamber went through nearly 30 amendments before passing the bill, which was altered to phase out the cap by 2015. Starting next year, the charter school cap doubles from 150 to 300.

Emergency manager law repeal update

The leaders of the petition drive to put the repeal of Public Act 4 of 2011 on the August or November ballot report that the minimum number of signatures have been collected, but they will be collecting more signatures to make sure. Once the petitions have been submitted to the Bureau of Elections, and the signatures certified and approved by the Board of State Canvassers, the current law is held in abeyance. The Senate has passed another emergency manager bill to take effect if the petition is approved for the ballot.

Future issues

The end of year media stories and interviews with lawmakers have surfaced a number of issues in the pipeline for 2012, an election year. The continued attack on public employee unions and public worker and retiree pay and benefits will likely continue. Anti-labor union legislation prohibiting agency shop, payroll deduction of dues, meeting on public property, restrictions on bargaining, etc. will likely continue. Proposed “right to teach” legislation would allow the privatization of public school instruction.

Business is clamoring for yet another tax reduction, elimination of the personal property tax. The Governor’s office seems to be saying it has found some revenue substitutes to replace the $800 million hit on local government revenues that elimination of the PPT would produce. Of course we will continue to hear about the need for an additional Detroit/Windsor bridge and objections from the current owner of the Ambassador Bridge.

No-fault auto insurance reform eliminating comprehensive health and personal care insurance coverage is in the works. A discussion about reform of the way we finance road and infrastructure funding is ongoing. The Governor and the Senate want to implement health care exchanges pursuant to the federal Patient Protection and Affordable Care Act, but the House leadership is balking. And there is much talk about changes to the school employee retiree health care program along the lines of what was done to the state employee health care. Drug testing of welfare applicants might see another effort even though it was overturned by the courts ten years ago. The Revenue Estimating Conference on January 13 will tell us more about what can be afforded in the new year.

News of the Day — If you are a SERA member, you are eligible to receive News of the Day, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to giving your name and chapter.

Editor’s note: Mary Pollock is the newly appointed Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail

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