LANSING, Mich. — Republican legislative leaders late Thursday canceled budget talks with Gov. Rick Snyder’s administration due to their dispute with him over making newly hired school employees eligible only for a 401(k) and no longer a traditional pension.
The move could put at risk a timely resolution of the next state budget, which Snyder and the GOP-led Legislature like to finish in early June. They often boast of enacting the budget months before it takes effect in the fall.
The Republican governor is resisting a legislative push to close the Michigan Public School Employees Retirement System’s hybrid pension/401(k) plan to new hires, saying it is working and citing large upfront transition costs that would extend beyond just the 2017-18 spending plan. GOP lawmakers say the state must stop piling up debt. They have trimmed Snyder’s budget proposal by hundreds of millions of dollars to make room for initial transition costs.
Senate Majority Leader Arlan Meekhof and House Speaker Tom Leonard “have identified reform of MPSERS as a top priority. It would be counterproductive to set budget targets without a clear forward path on MPSERS reform,” said Meekhof spokesman Amber McCann.
“We have a great opportunity to finally fix this important problem that is hurting our teachers, our schools and our state,” Leonard spokesman Gideon D’Assandro said. “We have to get it right.”
The legislative leaders, Snyder and their top aides met Thursday morning in his office at the Capitol building — a day after economists settled on revised tax revenue estimates. Snyder proposed other changes to the school retirement system, related to health care and also offering incentives to teachers to voluntarily take a 401(k) that would be more generous than now.
But Meekhof and Leonard want to make the more sweeping change, like was done in 1997 when new state employees were no longer eligible for a pension.
Snyder spokeswoman Anna Heaton said of the delay in budget discussions: “We are continuing to work through the various proposals on the table.”
Democrats who are outnumbered in the Capitol oppose closing the pension system to new hires, characterizing it as an attack on teacher benefits.
The leaders of the House and Senate budget committees had been scheduled to meet Friday with state budget director Al Pscholka to work on “targets.” The high-level spending decisions for areas of the budget are typically set before legislators hash out their differences over individual department budgets.