Senate approves retirement reforms with potential to save billions of taxpayer dollars
Legislation designed to ensure the retirement system is stable for state and public school employees was approved Wednesday by the Michigan Senate, said sponsors Sens. Mark C. Jansen and Jud Gilbert.
“By supporting these reform measures today, the Michigan Senate recognized the trend around the country and shows an understanding that our system is not sustainable long term,” said Jansen, R-Gaines Township.
Senate Bill 1226, sponsored by Jansen, would reform the Michigan State Employees’ Retirement System to encourage eligible state employees to retire by requiring individuals not retiring to contribute 3 percent to help ensure SERS remains financially sound. Once enacted, SB 1226 could result in a savings of more than $35 million next year.
Sponsored by Gilbert, SB 1227 provides similar retirement reforms for public school employees that could save an estimated $210 million for the coming school year. The measure would establish a hybrid retirement system for new employees and require employees to contribute at least 3 percent to the retirement system.
“This hybrid system will implement a more cost-effective retirement plan for new employees,” said Gilbert, R-Algonac. “The millions of dollars in savings will help us get back on the right track.”
The governor’s proposed retirement incentive, a 1.6 multiplier, was removed because it would have cost schools $500 million during the next 10 years.
According to the Senate Fiscal Agency, placing new employees in a hybrid retirement system and mandating a 3 percent employee salary contribution will save schools $2.8 billion throughout the next 10 years.
Since 2000, it is estimated that wage and benefit compensation for Michigan public employees has increased 11.4 percent, while private-sector worker compensation is down 19.7 percent during the same period – a 31 percent difference.
The measures now advance to the House of Representatives for further consideration.
Posted: Wednesday, April 14, 2010
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