Michigan Senate Approves “Grand Bargain” Bills

Michigan Senate Approves “Grand Bargain” Bills

The Michigan Senate today passed a $195 million financial aid package for Detroit’s pensions as part of the bankruptcy’s “Grand Bargain.” The Senate also approved bills that create state oversight of Detroit’s operations by requiring committees to monitor the city’s finances and pension investments as well as the establishing a chief financial officer position within city government.

Prior to the full Senate vote, the chamber’s Committee on Government Operations, approved the bills. Chaired by Senate Majority Leader Randy Richardville, the committee declined to send to the full Senate a bill that would have prevented the Detroit Institute of Arts from renewing its millage. That measure, approved in 2012 by voters in Macomb, Oakland and Wayne counties is worth $23 million of the museum’s $31 million annual unrestricted revenues.

The Legislature’s passage — and governor’s expected signature — means finalization of the “grand bargain” is in the hands of the city’s pensioners. The state money and the $466 million in pledges from private foundations and the Detroit Institute of Arts is dependent on a favorable vote from both general and police/fire groups in ongoing balloting. Votes are due back in July.

Detroit Journalism Cooperative partner Michigan Radio reported from Lansing where the federal judge who has been leading mediations spoke with reporters after the Senate action:

“Today we are all Detroiters and we are all Michiganians,” said U.S District Court Judge Gerald Rosen following the vote. Rosen has been overseeing talks between Detroit and its creditors, and is considered the architect of the “grand bargain.”

Here’s what The Detroit News wrote about the action. The Detroit Free Press story is here. The Freep also published an op-ed, lauding Lansing’s actions:

It’s an exceptional effort from a Legislature that’s too often fractious. It’s also a vote of confidence, not only from lawmakers, but Michiganders across the state, who consistently told pollsters that they support grand bargain — the $816-million deal (comprising funds pledged by the state, philanthropic foundations and the DIA itself).

Gov. Snyder issued a statement shortly after the votes, saying, in part, “…we saw lawmakers from across the state stepping up to approve legislation that helps Detroiters – and all Michiganders. This settlement plan will allow Detroit to build a solid fiscal foundation for its continuing comeback. The bipartisan package shows the commitment of our partners in the Legislature to assist Detroit pensioners, ultimately save taxpayers millions of dollars and improve the quality of life for the city’s 700,000 residents.”

Below are descriptions of the bills, their sponsors, their vote totals in the Michigan Senate today and their votes in the Michigan House May 22.. The bills now head to Gov. Rick Snyder for signature.

House Bill 5566: Passed 36-2. (It passed the House 103-7.) Dubbed “The Oversight Commission Act,” this measure creates a nine-member panel to oversee Detroit’s fiscal operations including its finances, budgets, contracts, collective bargaining agreements, debt issuance and revenue estimates. The original legislation was amended to include a City Council appointment. Introduced by Rep. John Walsh (R-Livonia).

House Bill 5567:  Passed 37-1. (It passed the House 105-7.) Detroit would be required to hire a Chief Financial Officer to manage day-to-day operations. Introduced by Rep. John Kivela, (D-Marquette).

House Bill 5568: Passed 24-14. (It passed the House 85-25.) This bill would require Detroit to transition new city employees from a traditional pension program to a defined contribution plan (401k) and prohibit the city from providing retirement and health care benefits greater than what state employees have available. Introduced by Rep. Gail Haines, (R-Waterford Township).

House Bill 5569: Passed 36-2. (It passed the House 100-10.) This bill would prohibit Detroit from opting out of the required 80/20 split (employer/employee) for health care premium payments. Introduced by Rep. Andrea LaFontaine, (R-Columbus Township).

House Bill 5570: Passed 37-1. (It passed the House 105-5.) This bill creates an Investment Committee make recommendations to pension fund boards and requires reports about travel and related expenses paid for by pension systems. Introduced by Rep. Ken Yonker (R-Caledonia).

House Bill 5573: Passed 21-17. (It passed the House 77-33.) To pay back the $194.8 million appropriated in HB 5572, this bill dedicates $17.5 million annually from the state’s tobacco settlement fund. Introduced by Rep. Alberta Tinsley-Talabi (D-Detroit).

House Bill 5574: Passed 21-17. (It passed the House 74-36.) This legislation enables the Michigan Settlement Authority to receive the $194.8 million. Introduced by Rep. Thomas Stallworth (D-Detroit).

House Bill 5575: Passed 21-17. (It passed the House 75-35.) Under this measure, the Michigan Settlement Administration Authority would be created to ensure the criteria are met for the state’s $194.8 million. Introduced by Rep. Fred Durhal (D-Detroit).

House Bill 5576: Passed 37-1. (It passed the House 98-12.) Binding arbitration for police and fire would be subject to approval from the Oversight Commission. Introduced by Rep. Joseph Haveman, (R-Holland).

The Senate Committee declined to pass two of the 11 bills out of committee. They were:

 House Bill 5571: Passed 66-44. The Detroit Institute of Arts is prevented from extending its current millage or having a new one under this measure. Introduced by Rep. Ken Goike (R-Ray Township).

House Bill 5572: Passed 75-35. This is the legislation that proposes taking $194.8 million from the state’s “rainy day fund” for appropriation to Detroit. Using an interest rate of 6.75 percent, the $194.8 represents the present value of the$350 million for Detroit that Gov. Rick Snyder had proposed.  Introduced by Rep. John Olumba (D-Detroit).

-By WDET’s Sandra Svoboda

@WDETSandra and nextchapter@wdet.org