Michigan would spend more to address debt in the teacher retirement system and to fix aging infrastructure under a budget deal that was finalized Monday, after Gov. Rick Snyder and Republican lawmakers reached a compromise to steer more newly hired school employees into a 401(k)-only plan.
The agreement, signed by state budget director Al Pscholka and the chairs of the House and Senate budget committees, cleared the way for final voting in the GOP-led Legislature to begin Tuesday before a summer recess. The next fiscal year begins in October.
After Snyder proposed his spending plan in February, Republicans pushing for teacher retirement changes held in reserve nearly a half-billion dollars for covering transition costs to prohibit new school workers from getting a traditional pension in retirement. But not as much money is needed now that Snyder and GOP legislators have agreed to let new hires still qualify for a pension benefit if they contribute more of their pay and assume more risk.
Instead, the state would spend $255 million more than planned on the Michigan Public School Employees Retirement System. Much of it addresses $29 billion in unfunded liabilities in a legacy pension system for those hired before mid-2010 that is 60 percent funded. Another $150 million would be added to Michigan's savings account, and $35 million would go to a statewide infrastructure fund created last year in the wake of Flint's drinking water crisis.
Roughly $100 million more also would be spent in areas where Republican lawmakers had cut below Snyder's recommendation such as prisons, social services and environmental protection. Specifics will be divulged when a legislative conference committee meets Tuesday.
The full House is expected to vote on the $55 billion spending plan later Tuesday, the same day it also plans to finish passing legislation that would coax teachers into a 401(k)-style retirement benefit instead of one that includes a pension combined with a small 401(k). The bill would automatically enroll new employees hired on or after this Feb. 1 into a more generous 401(k)-only plan like what state workers receive — unless they opt out within 75 days and pay more of their salary toward a pension than current workers do.
Both the House and Senate passed the legislation last week, but final votes are required.