OPEB/Retiree Health Care Reform Work Explained by Michigan Municipal League

The reform of retiree health care (OPEB) is one of the key topics the Michigan Municipal League’s Anthony Minghine discusses during his many SaveMIcity presentations. Reforming this issue is vital to efforts to fix Michigan’s broken system for funding municipalities. The League has been working on this issue and here is an update about it from the League’s Chris Hackbarth, director of state and federal affairs. This is also posted on the League’s legislative blog, Inside 208, here.

By Chris Hackbarth on Inside 208 legislative blog:

Following the Legislature’s attempt at retiree health care (OPEB) reform during lame duck last year, the League was invited to participate in Governor Snyder’s Responsible Retirement Reforms workgroup earlier this year.  That group published its report in July (See the report here) and while the report achieved some limited consensus, the League expressed disappointment that the recommendations did not offer any opportunities for communities to better control the cost structure and ongoing liabilities from this crippling cost driver ( www.SaveMICity.org )

Key legislative leaders and Administration officials have been meeting this fall to develop a legislative proposal based off of the task force report and have solicited input from the relevant interest groups, including MML, and other local government and labor groups.

Our basic understanding of the proposal, based upon the structure of the task force report, is that it would establish legacy cost funding levels and/or percent of budget spending thresholds that if a community were to trip one of those triggers, they would be subject to Treasury review.  Following that review if Treasury deemed a community to be in an underfunded status, the community would have a period of time to develop their own plan to address those under-funding concerns, working with their active and retiree populations.  If a community is unable to develop a plan to address this situation, then a yet to be identified enforcement mechanism would be employed to utilize a specified list of options to address the underfunded situation.

The House Local Government committee heard testimony earlier this month from the state Treasurer, outlining the findings of the task force report and a presentation of data outlining the status of municipal pension and OPEB funding statewide from one of the legislative leaders involved in this issue, as well as the City of Port Huron.

With only about three weeks of session remaining this calendar year, there is broad speculation that a reform proposal could be introduced following the Thanksgiving holiday.  The League is hopeful that any forthcoming proposal will be a thoughtful approach that ensures good, sustainable healthcare for retirees by including useful tools for local units to control their OPEB expenses. We are awaiting an opportunity to review any proposed language to determine if it meets those objectives. This is a quickly evolving situation, so stay tuned as we move through the coming weeks.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and chackbarth@mml.org.