Capitol News

May 2013

Federal and state budget proposals for FY 2013-2014 captured major legislative attention in April and early May. Some will affect seniors and retirees’ pocketbooks and quality of life.

Federal Budget

On the federal level, $580 billion increase in taxes on the wealthy over 10 years primarily by limiting deductions.

Chained CPI — Capturing seniors’ attention was the proposal to shift in 2015 the way Social Security calculates yearly cost-of-living increases from the standard Consumer Price Index to what is called a “chained CPI.” The chained CPI alters the calculation of the CPI by assuming that as prices increase, consumers make cheaper substitutions in what they purchase. The new formulation would slow the increase in all federal benefits and raise income tax revenues by putting some taxpayers into higher brackets sooner, for a total increase in tax revenue of $230 billion over 10 years.

The National Committee to Preserve Social Security and Medicare says the chained CPI would mean an immediate benefit cut of $130 per year for the typical 65-year old retiree and would grow exponentially to a $1,400 cut after 30 years of retirement. On average, annual increases in Social Security payments, government pensions and veterans benefits would be about 0.3 percentage points smaller each year under the chained CPI, the Social Security Administration says.

An AARP poll found that 70 percent of voters age 50-plus oppose the use of the chained CPI to cut benefits, and two-thirds of them — including 60 percent of Republicans say they would be “considerably less likely” to support a congressional candidate if he or she backed a new way of calculating consumer prices. And 84 percent of voters over 50 say Social Security has no place in budget-deficit discussions, since it is self-financed.

Medicare changes — The president’s budget would take out $400 billion from Medicare over a decade, mostly from reductions to hospitals and other health care providers, but also through benefit and premium increases. It would raise monthly Medicare premiums for higher-income retirees starting in 2017. The four income brackets would increase to nine income brackets on which the higher premiums would be charged.

Twenty million Medicare beneficiaries also would end up paying higher income-based premiums for both their outpatient (Part B) and prescription (Part D) coverage over time. Currently only about 1 in 20 Medicare beneficiaries pays the higher income- based premiums, but that would increase to 25 percent. The Detroit News calculated that if the plan were in effect today, a retiree with income of $85,000 would pay nearly $168 a month for Part B, compared to $146.90 currently. The Associated Press has said that Congressional Republicans agree with the president on this proposal, making it highly likely the idea will become law.

What to do — Voter opinion matters and can change direction of the budget pundits promoting the chained CPI and greater means testing of Medicare. If you have an opinion on the proposals, write the President, your U.S. Senators as well as your Member of Congress. All can be located through SERA’s Web site under the Capitol News navigation tab or through your local phone directory.

State Budget

At this writing the House has approved both their budget bills and the Senate has approved all but one of their 17 bills with the goal of June 1 for completion of negotiations among the Governor’s office and House and Senate conferees over any differences.

Medicaid expansion — The Governor’s wants to accept Obamacare’s Medicaid expansion to 133 percent of the poverty level that would cover 450,000 more Michiganians and save the state $200 million in mental health costs. There is no state money required for the first three years of a Medicaid expansion and the federal government will finance 90 percent thereafter. The Governor proposes to sock away some of the first years’ federal money in a savings account to pay the state’s share for later years, but opposition to Obamacare in general and the fear of Tea Party primary challengers has scared off many Republican lawmakers. The House Republicans have proposed a Medicaid Reform bill that would limit Medicaid for this group to four years and require premiums or co-pays with incentives for healthy behaviors such as losing weight or quitting smoking. It would require not only approval by the legislature and Governor but a federal government waiver.

Roads — Another big ticket item is the stalemate over funding a road improvement plan. The Governor has proposed a $1.2 billion road plan that would be funded with increases in vehicle registration fees and a fuel tax increase. Senate Republicans want to ask voters for a 1 percent sales tax increase to pay for it. The Democrats are apparently leery of putting up favorable votes on any road funding plan unless Republican leaders agree to leave the prevailing wage law alone.

A smaller issue is that the low-income energy assistance program may need to be financed through an addition of $1 per meter on utility customer bills to generate $60 million to fund the program.

State Budget Director John Nixon has labeled the House budget “pretty austere” and “not acceptable,” according MIRS News. He said the “hot spots” will be discussed after the May 15 revenue estimating conference.

Other State News

457 Plan — The Auditor General recently released an audit report finding some key reporting dates for Michigan’s 457 plan were missed, in part because there was just one person with other duties assigned to finish the closing statements. The audit, which looked at the plan’s overall finances for the fiscal years 2010-11 and 2011-12, gave a clean opinion on the overall financial operations of the fund. At the end of the 2011-12 fiscal year, the fund had assets of $1.680 billion and had investment gains of 12.4 percent. The plan was initially created in 1974 for state workers and was amended in 2010 to allow public school employees to participate.

DOC privatizes food services — After facing a barrage of criticism in March at a joint appropriations sub-committee hearing for deciding not to contract out food services, the Department of Corrections worked with the bidder Aramark and found enough “errors” in the bid to reduce it 17 percent so that it could meet the 5 percent savings requirement. As a result, 373 state employees will be laid off with a projected 20 percent savings amounting to about $12 million in the first year and $16 million per year thereafter. Aramark is considered a leader in the prison food service industry, but newspaper accounts compiled by MIRS News indicated food poisoning incidents, a prisoner riot over food quality, and incidents of maggots and dead mice in the food prepared by Aramark at prisons around the country.

Rehiring DOC retirees — HB 4664 would remove the September 30 sunset date and allow the Department of Corrections to indefinitely hire retirees to work part time in various facilities. PA 432 of 2012 enacted last year allows the DOC to hire retirees to work part time to reduce overtime costs. By the time the 2012 bill passed, and the department went through the process of recruiting retirees, there wasn’t much time left for them to work. There are currently three retirees working for the department, and 25 who are on board to begin working.

Domestic Partner Benefits — The Michigan Supreme Court, in a unanimous and simply-worded order, declined to accept for consideration the appeal of Attorney General Bill Schuette about the Civil Service Commission’s decision to approve labor contracts including domestic partner health care insurance benefits. Unrelated adults living with a classified state employee meeting certain requirements are eligible to receive insurance benefits on the same basis as spouses or their dependent children. Schuette argued that the policy violated the same-sex marriage ban approved by voters in 2004. Governor Rick Snyder signed legislation in 2011 banning public employers from offering this type of benefit, but state employee personnel policies are set by Civil Service Commission under the state constitution and thus unaffected for the most part by state statutes. State employee retirees are not yet covered by the policy.

Sixth Circuit Upholds Ban on Collecting Union Dues — A divided U.S. Sixth Circuit Court of Appeals has held there is nothing in the U.S. Constitution, and specifically nothing in the First Amendment, that prevents Michigan from prohibiting school districts from collecting union dues from its workers. The decision overturns the trial court’s preliminary injunction blocking implementation of PA 53 of 2012. An appeal is likely.

Pension tax repeal bills — House Democrats introduced six bills on tax-filing day, April 15, to restore the child deduction credit, repeal the pension tax, restore the Homestead Property Tax Credit and increase the Earned Income Tax Credit to 11 percent. The Senate sent Senator Rick Jones’ legislation repealing the pension tax and restoring the HPTC to the last day of session this year, more or less burying it.

Marijuana decriminalization — Rep. Jeff Irwin (D-Ann Arbor) with bi-partisan support, introduced legislation to decriminalize possession of less than one ounce of marijuana, making it a civil misdemeanor. Ann Arbor, Detroit, Flint, Grand Rapids, Traverse City, and Ypsilanti have similar ordinances. Simple possession would be punishable by a $25 fine for a first offense and up to $100 for repeat offenders. Sale and possession of more than one ounce would remain a felony. Irwin says Michigan wastes $300 million a year arresting, trying, and incarcerating people for marijuana use.

Auto No-fault Limitations — After 7 hours of dramatic testimony from car accident victims and insurance company executives, the House Insurance Committee approved along party lines a bill that would impose a $1 million cap on medical benefits for those catastrophically injured in auto accidents. This would force them to spend down their assets to become Medicaid eligible thereafter. At the current time there are not enough votes in the House to pass this legislation because all the Democrats and about 9 Republicans have announced opposition to it.

Welfare measures — The Michigan House has approved HB 4118, which would require suspicion-based drug screening and testing for some welfare recipients in three counties. The plan would not cover food assistance programs. The House also passed a bill that would punish the whole family of welfare recipients for school truancy of one or more of them.

Veterans — On its way to the Governor is a bill to require the Secretary of State to designate on state identification cards and drivers licenses whether the person is a military veteran, if this is requested by a veteran who has specified documents proving this status. This would give veterans easier access to benefits and discounts.

Recent News — If you are a SERA member, you are eligible to receive Recent News, 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 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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