LANSING – Senate Republicans placed a bull’s-eye Tuesday on public employee pay and benefits as the centerpiece of their efforts to restructure the cost of government, calling for government workers to take a 5 percent pay cut and pay 20 percent of their health insurance premiums.
The sweeping plan, which would accomplish the pay cut and health insurance contribution through constitutional amendments to be placed on the August ballot, would affect employees at all levels of government – elected officials like the governor and legislators, state employees, local government employees, teachers and others.
“The reality is we cannot afford the state government we have today,” said Senate Majority Leader Mike Bishop (R-Rochester). “We have a crisis situation.”
The Senate Republican plan omits any changes to the state’s tax structure. Democrats, including Governor Jennifer Granholm, and various groups have urged an overhaul of the state’s taxes, particularly through the extension of the sales tax to services and curbing the Michigan Business Tax.
Bishop said he also is interested in tax reform, but not to generate new revenue.
Senate Republicans also backed off the repeal of binding arbitration for police officers and firefighters, instead proposing a plan designed to shorten the binding arbitration process and allow local governments to save costs on negotiators and attorneys.
Among the other major changes in the Senate Republican plan: reducing the number of state departments from 16 to 11, capping administrative costs in school districts at 28 percent of the entire district budget and eliminating yet-to-be-determined optional services under Medicaid.
The department consolidations would include merging Attorney General and Civil Rights; Community Health and Human Services; Corrections, State Police and Military and Veterans Affairs; and Information Technology, Civil Service and Management and Budget.
Governor Jennifer Granholm has already moved Civil Service into DMB, and DIT will be moved there March 21 under another executive order.
Granholm agreed that changes needed to be made to state government, but questioned whether a constitutional amendment was the right tool.
“There has to be additional reforms to reduce the cost of government,” Granholm said. “But a constitutional amendment would be very slow.”
And she questioned the wisdom of taking all of those cuts from state employees, though she would not specifically answer whether she would support the proposed pay cuts and benefit co-pay increases.
She said the administration was continuing to negotiate with state employee unions to cut payroll costs and said she would release additional plans for cuts and reforms “in the very near future.”
But she again said the state needs also to change its tax system. “We have a tax structure that’s not reflective of the economy,” she said.
House Speaker Andy Dillon (D-Redford Twp.) gave backhanded praise to the Senate Republican plan and criticized its omission of ending lifetime health care coverage for current legislators. The Senate plan only eliminates the benefit for those legislators not vested as of January 1, 2010.
“It’s good to see that Senate Republicans have finally embraced serious reform proposals, several of which the House has already acted upon,” Dillon said in a statement. “We are looking at everyone’s proposals, and hopefully we will forge an outcome to the state’s fiscal challenges that is best for the people. It was disappointing to see that while Senate Republicans are asking for others to sacrifice, they were careful enough to protect their own taxpayer-funded lifetime health care benefits. Protecting politicians while asking for more sacrifice from our residents is not the kind of government reform that people are demanding.”
To put the constitutional amendments on the August ballot, two-thirds majorities in both houses of the Legislature would have to approve the measures by early June. Bishop declined to set a timetable for the Senate to act on the legislation, but said it would be as soon as possible. Bishop also created a new committee, which he will chair, to handle the legislation.
A constitutional amendment would require not only the support of Democrats who control the House, but also at least three Senate Democrats to attain a two-thirds majority in the Senate. Bishop said discussions already are underway about launching a petition drive if the measures fail to clear the Legislature.
Senate Minority Leader Mike Prusi (D-Ishpeming) said in a statement that he is open to looking at the proposals.
“Our caucus supports meaningful reforms that are in the best interest of moving Michigan forward, and I look forward to discussing these proposals in greater depth in the coming days,” he said. “However, while reforming how government does business is of critical importance, there are other issues that matter to Michigan families. I encourage my colleagues from across the aisle to take action on several additional legislative issues before our chamber, including foreclosure assistance, lowering of insurance rates and Hire Michigan First. Reforms will help us in the future, these other proposals help families today.”
Bishop said nibbling around the edges on reforms no longer will work.
“It requires a huge and immediate attention to the size of our government and the cost of our government,” he said. “We’ve got to go for the disease itself, and we believe that is the cost of government.”
Officials with public employee unions sharply criticized the proposal, saying government workers already have sacrificed considerable pay and benefits during the last 10 years.
“It’s yet another effort to balance the budget on the backs of working families in this state,” said Doug Pratt, spokesperson for the Michigan Education Association, who said school employees have saved districts almost $1 billion in the last three years. “These concessions and savings are already happening. A one-size-fits-all solution simply doesn’t make sense.”
Pratt also criticized the proposed 28 percent cap on administrative costs, calling it arbitrary. Bishop said the average administrative cost percentage is 29 percent in Michigan with 211 districts spending more than 28 percent of their funds on administration.
Pratt also questioned Senate Republicans’ omission of any tax proposals.
Nick Ciaramitaro of the American Federation of State, County and Municipal Employees Council 25 derided the plan as a 5 percent income tax on government workers.
“We’re basically taking 5 percent of their income to run the government. They do the work and they pay to run the government,” he said. “Workers, whether you’re public or private, negotiate how much their wages and benefits should be at the bargaining table. If you’re going to dictate that, then you’re ignoring the dignity of the work.”
Ciaramitaro cited the study showing $3.7 billion in state employee concessions, a review that didn’t include local government workers. “We’re certainly willing to negotiate our fair share, but we’re not able to carry the whole load of running the state on our backs,” he said.
Cyndi Roper of A Better Michigan Future said the plan failed to address the real issue of ineffective tax breaks and an outmoded tax structure.
“Senator Bishop and others ignore the inequalities in our tax structure that lead to drastic cuts in public services and programs needed to foster a thriving economy,” she said in a statement. “2010 is not the year to once again shift the burden to low and middle-income families, and drive our economy further down by reducing wages of workers and spending on important public services.”
But the binding arbitration proposal received enthusiastic support from the Michigan Municipal League. City officials are hopeful of realizing savings from sh
