DALLAS -- The Michigan House on Thursday began hearings on a plan introduced by House Republicans to limit retirement healthcare benefits for police officers, firefighters and other government workers in cash-strapped municipalities across the state.

Supporters say Michigan House Bills 6074 to 6086 would rein in unfunded liabilities in communities that have extended more benefits to employees than they can afford.

The legislation only affects local governments with retiree health costs that are less than 80% funded. If an entity is funded at or above the 80% benchmark, but falls below 80% funding and remains at that level for two consecutive years, it would be subject to the new laws.

The proposal would affect current employees and retirees.

New employees hired after April 30, 2017 would be excluded from retiree health care coverage. Instead, a local unit of government could contribute up to 2% of an employee's pay to a tax-deferred Health Savings Account that could be used at retirement.

The 13-bill package was added to the committee agenda late Wednesday. However there is no set time frame on when the bills will be heard by the full House. "It is not my expectation that a gavel will be cast even in committee today," House Speaker Kevin Cotter, R-Mount Pleasant, said on Thursday.

Rep. Aric Nesbitt, R-Lawton, said that out-of-control costs brought on by retirement promises offered decades ago are draining county, city, village and township treasuries, taking away funding for critical public safety services such as police, fire and emergency medical care.

As of 2014, other post-employment benefit unfunded liabilities across the state were roughly $11 billion, according to Michigan Treasury. The legacy costs continue to increase rapidly because of older retirement plan design, an increase in life expectancy and runaway medical care inflation.

"If these liabilities are allowed to continue, communities will fall deeper and deeper into debt, threatening vital public services that families deserve," Nesbitt said. "These mounting debts were devised by politicians 40 and 50 years ago, and are no longer sustainable by our local governments that are drowning in debt."

The Senate is considering a separate proposal that would close the state's teacher pension system to all new hires and instead offer them 401(k)-style "defined contribution" plans.

That proposal is supposed to help deal with the $26.7 billion in unfunded pension liabilities facing the Public School Retirees Retirement System. The move would affect all school employees hired on or after July 1, 2017.

The Senate also approved a resurrected bill on P3 projects Thursday.

Senate Bill 627, sponsored by Senate Majority Floor Leader Mike Kowall, R-White Lake, was passed by 28-to-6 vote. It heads to the House.

The bill had originally been voted down by the Senate in an 18-to-19 vote on Tuesday. Dave Biswas, a spokesman for Kowall's office, said that the vote reflected some last minute requests for provisions protecting union labor on P3 projects requested by Senate Democrats, that was included in the final version of the bill.

The legislation allows for "Public Authorities" to enter into public-private agreements for the development of an eligible project. Eligible project is defined as a transportation project or facility project such as health care and laboratory facilities.

It enables the state to move ahead with projects under consideration such as mental health hospitals, veterans facilities and laboratory facilities, but would limit the ability to move forward with additional projects without further legislative action.

The bill does not mandate any particular projects.

"The legislation is to provide Michigan's public authorities an avenue to more effectively deliver and manage assets over the long run by combining the design, construction, finance, operations, and maintenance of an asset in a unified manner," said Jeff Cranson, a spokesman for Michigan's Department of Transportation. "P3 may reduce risks associated with deferred maintenance, cost overruns, and accelerated lifecycle investments that currently exist in constrained budget environments and can be used to accelerate project delivery."

Sen. Patrick Colbeck, R-Canton, who voted against the bill, said it effectively removes legislative oversight of public-private partnerships that would be endowed with the authority to make people pay fees.

"Under SB 627, the legislature would be permanently handing that power to unelected state official, who would be able to unilaterally determine which projects could charge these fees and who determines their rates," said Colbeck. "I do not believe the legislature should abdicate their responsibilities in a manner that leaves taxpayers with no one they could hold directly accountable for the fees charges in association with such projects."

Anne Schieber Dykstra, a spokeswoman for the free-market oriented Mackinac Center for Public Policy, said the bill is unnecessary mainly because she said P3s can already be done individually. "We don't need a sweeping bill to make them happen," she said. "If a municipal or state government wants to contract out a service out with a private enterprise, then it should continue to do so through the legislative process."

Dykstra said the concern is that a blanket proposal like SB 627 may open the door to projects Michigan taxpayers don't support.

One section of the bill, for example, establishes the ability of unelected authorities to create toll roads, for example, something "the people of Michigan have never supported," said Dykstra. "Last year Michigan voters resoundingly defeated a gas tax. A toll is another form of tax."

The bill was originally introduced with companion bill 628, which gave the authorities more leverage to collect unpaid toll fines. That bill is now off the table but Dykstra said it could be easily be resurrected at any time.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.