December 12, 2016

Lame Duck “Quick” Update

Income Tax Revenue Changes for School Aid Fund
A plan to eliminate nearly $430 million in School Aid Funding (SAF) and move it to the General Fund/General Purpose (GF/GP) has failed to gain the support of legislators this Lame Duck session. The idea, backed by Governor Snyder, will join the likes of MPSERS reform and not be a priority in the closing of this legislative session. Although the SAF was spared for now, we expect the discussion will be resurrected in the coming months. As you are aware, any reductions in SAF revenues without replacement funding is a loss of school aid and support for Michigan students. The January Consensus Revenue Estimating Conference (CREC), which takes place on Thursday the 12th, will give us an opportunity to see how our current revenue sources are tracking against projections and the first projection for FY2017-18.

Electric Choice Reform
Legislation has been pushed which will effectively eliminate electric choice programs for school districts, which will have a negative impact on budgets in the coming years. Although the measure appears to not currently have the votes to pass, this is something to keep on your radar in the last week of the Lame Duck session. Here is a link to SB 437 and the analysis.

Union Release Time – Reportable Time for MPSERS?
Senate Bill 279 was heavily discussed last week in the House Committee on Commerce and Trade. The Committee passed the bill and it is now before the full House of Representatives for a potential vote this week. The bill focuses on banning union leave time in public contracts as well as any paid release or leave time for union business. An amendment to the bill also included language that retirement leave time could not be earned for any time taken for union purposes. This would have a direct impact for schools which currently report time as MPSERS reportable income related to Profession Services Leave/Professional Service Release Time leave time. Per the Office of Retirement Services – Reporting Instruction Manual (RIM) 3.02.05:

Professional services leave (PSL) is when a public school employee leaves their normally assigned duties to work in a position for an employee organization or union on a part-time or full-time basis. The public school employee has a contract renewed annually with the employee organization/union for their role.

Professional services released time (PSRT) is when a public school employee is released from their normally assigned duties to handle employment matters for an employee organization or union.

It is the reporting unit's obligation to collect employer contributions from the employee organization group or unions which are paid to the retirement system for member's performing PSL or PSRT. MCL38.1371(6) states "The reporting unit shall be reimbursed those sums paid to the retirement board pursuant to subsection (5) by the member or the public school organization on a current basis."

Employer contributions are the total percentage of reportable compensation charged to all Michigan Public School Employees Retirement System reporting units. Contributions are the sum of Pension Normal Cost, Pension UAAL, Early Retirement Incentive Program, Health Normal Cost, Health UAAL, MPSERS UAAL Rate Stabilization and (in 2014) the One-Time MPSERS Liability Prepayment.

Both of these designations are currently MPSERS reportable for retirement purposes.

An unintended consequence of the proposal, although minor, is that it would further erode the reportable income base of the MPSERS system and add to an increased pressure to buy down the unfunded liability which now represents nearly 33% of the total MPSERS rate!

Pre-Labor Day Start

Last week, the Senate Education Committee heard testimony on legislation that would end the ban on starting school before Labor Day. Included in Senate Bill 567, districts would not be allowed to be in session on the Friday prior to Labor Day.

This is something that has been discussed for years and although it may not be resolved prior to the end of the Lame Duck session, it’s expected to again be on the list for the new session beginning in 2017.

Stay tuned for more information as it becomes available on the final days of this legislative session!


David and Bob

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