State employee retirement plan remains sticking point in Michigan state budget

Retirement plan holding up Michigan state budget

LANSING, Mich. — A plan aimed at spurring more state government workers to retire stalled Wednesday in the Michigan House, an obstacle to finishing the next budget before a new fiscal year begins Oct. 1.

Legislative leaders have time to tweak the proposal and attempt to get it passed before next week’s budget deadline, or come up with an alternative money-saving proposal. They’re making steady progress on other parts of the budget plan.

But the retirement incentive package drew opposition late Wednesday afternoon from Democrats who hold the majority in the House as well as Republicans. Attempts to pass two versions of the plan failed so convincingly that votes weren’t formally counted before an electronic board displaying the tally was cleared.

Both versions would sweeten the pension benefits of eligible state employees who choose to retire. One version calls for remaining employees to chip in up to 3 percent of their pay toward retiree health care, but another version that failed Wednesday would not require an extra contribution from employees.

A retirement incentive plan is part of a tentative state budget deal reached between Democratic Gov. Jennifer Granholm, Republican Senate Majority Leader Mike Bishop and Democratic House Speaker Andy Dillon. It could save the state at least $50 million in its first year as Michigan tries to erase a projected $484 million budget deficit.

Dillon and Republicans each said it appeared the other party was playing politics with the retirement incentive proposal, a version of which has passed the Republican-led Senate.

“This causes a little bit of a problem,” Dillon said as the proposal was failing to gain support Wednesday. “But I wanted to know the lay of the land for tomorrow.”

The Legislature returns to session Thursday.

Many lawmakers, especially Democrats, don’t like the probable alternative if the retirement plan doesn’t pass. They’ll likely be asked to cut tax revenue-sharing payments that go to local governments to help pay for services such as police and fire departments.

The House approved a new prisons budget Wednesday by a 64-42 vote that calls for the Department of Corrections to come up with $42 million in unspecified cuts at facilities. The Republican-led Senate already approved the plan and it should soon be headed to Granholm for her review.

Senate Republican leaders say the facility savings can be reached without closing prisons. But Department of Corrections spokesman Russ Marlan said it will be “next to impossible” to achieve the savings without prison closings or consolidations.

The Legislature has approved a tax amnesty program that supporters say would raise at least $60 million. The state treasurer’s office would establish a window — May 15 through June 30 — for delinquent taxpayers to pay off their debts without criminal or civil penalties. The program would apply to taxes due before the end of 2009.

The Senate passed the amnesty bill 33-4 Wednesday and the House passed it 57-48. The bill should soon be sent to Granholm as soon as it’s formally enrolled by the Senate.