(Source: MIRS.news, Published 04/15/2024) The Senate will not be following the Governor's proposal to spend anticipated debt payments for public school retirees on other education programs as part of its Fiscal Year (FY) 2025 budget plan that it will begin to advance in the coming days, MIRS has learned.
Senate Appropriations Committee Chair Sarah Anthony (D-Lansing) said the Senate will be taking a "different approach" than using money that would have been spent on pre-funding retirement obligations since the retiree health care portion is expected to be 100 percent covered this year.
Eight education groups, including the K-12 Alliance and the Michigan Association of Superintendents and Administrators (MASA) wrote in a letter to lawmakers that continuing the payments permanently frees up $500 per pupil in spending for every school in Michigan, without raising taxes or cutting other programs.
"After speaking to the education community, I think we are probably going to take a little bit (of a) different approach, but that's where negotiations begin, between our approach, the executive's and the House," Anthony told MIRS.
On Tuesday at noon, the Senate PreK-12 Appropriations Subcommittee is scheduled to vote on its recommendations for FY 2025, which will be featured in subcommittee chair Darrin Camilleri (D-Trenton)'s SB 751 .
In early February, MIRS learned that a major component of the Governor's executive budget recommendation was rerouting $670 million in expected payments toward the Michigan Public School Employees Retirement System (MPSERS).
Currently, the state is required under statute to pay more to MPSERS than it did the previous year until unfunded actuarial accrued liability (UAAL) is fully paid for. In FY 2022, UAAL in MPSERS was evaluated to be at $34.96 billion when it comes to pensions, and is projected to not be fully funded until 2038.
However, the Governor's Office of Retirement Services has made the case that pension UAAL could be separated from other post employment benefits (OPEB) UAAL, dealing with retirees' health care benefits, which was 126.9 percent funded as of Sept. 30, 2023.
Gov. Gretchen Whitmer has requested that the Legislature alters the aforementioned floor provision, making pension UAAL and OPEB UAAL two individual pieces in the system following their own floor provisions, freeing up money – that would have exclusively gone to OPEB – to cover other education expenses because OPEB UAAL is more than fully funded for.
"I trust that the Governor and her team did some significant research and vetted that proposal, and so it is going to be a part of the mix and a part of the conversations as we're negotiating – so I will never say that that is dead on arrival. I believe that the Senate may have a slightly different interpretation, and admittedly, a part of our charge is to listen to the voices of our Republican colleagues, who have spoken out about their perspective on that treatment," Anthony said.
Shortly after news broke of Whitmer's MPSERS recommendation in February, Senate Minority Leader Aric Nesbitt (R-Lawton) issued an opposing statement, describing it as "raiding the state's teacher pension fund to play shell games with tax dollars because of short-term political ambitions."
As for other likely priorities the Senate is anticipated to make clear in its FY 2025 budget recommendations, Anthony pointed to housing, as well as creating an economic development budget that aligns with Sen. Mallory McMorrow (D-Royal Oak)'s legislation to make the Strategic Outreach and Attraction Reserve (SOAR) Fund more dedicated to community investments, and less zoomed in on corporate incentives.
Ahead of leaving for spring recess, the Senate approved McMorrow's SB 559 by a party-line vote. The bill redesigns the SOAR Fund, which was established with an initial $1 billion General Fund appropriation in 2021, intended to lure large-scale corporations into developing in Michigan. Nowadays, it offers performance-based grants to cover workforce training programs, heavy machinery purchases, infrastructure upgrades accommodating a business project and "other capital investments."
Through McMorrow's bill, 50 percent of the money deposited into the fund must be reserved for community projects that fall under a new "360 Program," like building and expanding regional transit, foreclosure prevention programs and down payment assistance for local housing, public recreational spaces and public services related to – but not limited to – child care, health care and recreational or educational programs.
"Our recommendations will mirror the SOAR reform concepts that were voted out of the Senate right before legislative break. It is a priority for us to reimagine what economic development looks like," Anthony said, pointing to a reform that Whitmer herself said that she did not sign off on.
As for the housing component, Anthony said "we have almost doubled down on our desire to address housing all across the state," and the chamber's budget recommendations will feature significant housing investments.
"We come from it from home repairs, blight elimination, addressing public housing and also some innovative strategies to actually address the crisis," she said. "Many of these pieces are already embedded in (the Michigan State Housing Development Authority's) programming, but we are just trying to add additional dollars to the work we're doing."
