During the final weeks of the lame duck session, Michigan Democratic lawmakers attempted to advance several expansions to the state pension system. Bills in both the state House and Senate aimed to overhaul pension systems for public school employees, state police, and specified state workers. These bills are at various stages in the legislative process, pending approval in either chamber. Concerns have been raised that the proposed changes could jeopardize the state’s financial stability.
The Reason Foundation, a Libertarian think tank specializing in nonpartisan public policy research, warned that House Bill 6061 could reverse progress in managing public pensions by reopening an underfunded legacy system and eliminating the current defined contribution retirement plan. This transition, according to the foundation, may increase the state’s retirement plan unfunded liabilities from $5.4 billion to over $8 billion in the next 15 years.
Supporters of the legislation argue that returning to a traditional pension plan could improve recruitment efforts. State Rep. Matt Koleszar, a co-sponsor of House Bill 6061, believes that a better retirement system for teachers could address the significant teacher shortage in the state.
Another bill, House Bill 6060, also related to state pensions, passed the House and is now under consideration in the Senate. The passage of this bill was met with opposition from House Republicans, who had left the session in protest against last-minute bill approvals by Democrats. As for House Bill 6061, it remains in the House without a vote.
House Bill 6060 specifically focuses on the Public School Employees Retirement Act, giving both newly-hired and current employees the option to join a defined benefit plan. House Bill 6061, on the other hand, proposes changes to the State Employees’ Retirement Act, automatically enrolling new hires into a defined benefit plan and allowing existing employees to make the transition.
The Pension Integrity Project, affiliated with the Reason Foundation, emphasized that House Bill 6061 could undo decades of pension reform and create additional unfunded liabilities. A legislative analysis anticipates increased costs associated with the passage of these bills.
The Senate also passed a series of bills proposing significant modifications to the Michigan State Employees’ Retirement System and State Police Retirement System. This legislation is awaiting a vote in the House. The Senate Fiscal Agency’s analysis warns of potential future unfunded liabilities on top of Michigan’s existing $49 billion pension debt.
Conditions did not align with actuarial assumptions, and the future liabilities were neither known, assumed, nor calculated in this analysis. The Pension Integrity Project anticipates that this extension could result in an added expenditure ranging from $800 million to $1.85 billion over the upcoming 30 years.
