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2006 House Bill 6694: Allow government borrowing to pay unfunded retiree benefits
  1. Introduced by Rep. Dave Hildenbrand (R) on November 30, 2006, to allow local governments to borrow money to establish a fund to cover up to 75 percent of the current unfunded actuarial liabilities created by past employee contracts that promised government workers pensions or post-retirement health care coverage without setting sufficient money aside for this. A vote of the people would not be required to authorize the new debt, but it would be subject to a referendum if a certain number of voters signed petitions. The proceeds of the borrowed money would be invested in the same way as pre-funded benefits (in the same way as pension funds, that is).
    • Referred to the House Local Government and Urban Policy Committee on November 30, 2006.
      • Reported in the House on December 5, 2006, with the recommendation that the substitute (H-1) be adopted and that the bill then pass.
    • Substitute offered in the House on December 5, 2006, to replace the previous version of the bill with one that somewhat limits the local government borrowing it would allow, and does not allow school districts and community colleges to do this kind of borrowing. This was replaced by another substitute adds additional restrictions. The substitute passed by voice vote in the House on December 5, 2006.
    • Substitute offered by Rep. Dave Hildenbrand (R) on December 7, 2006, to replace the previous version of the bill with one that that is more restrictive on goverment's ability to cover unfunded pension liabilites, and allows this only for government employee health care liabilities. It would require governments to adopt "defined contribution" type post-retirement benefit systems for all new employees as a condition of assuming this extra debt, and would require that the bonds be rated at least AA by one of the municipal rating agencies. The substitute passed by voice vote in the House on December 7, 2006.
    • Amendment offered by Rep. Leon Drolet (R) on December 7, 2006, to raise the minumum bond rating for money borrowed to cover government retiree health care liabilities from AA to AAA. This would mean that local governments with less sound balance sheets and revenue prospects would be unable to engage in this kind of borrowing. The amendment failed 35 to 67 in the House on December 7, 2006.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. Dave Hildenbrand (R) on December 7, 2006, to strip out the provision that prohibits local governments that use this type of borrowing to cover retiree health care liabilities from giving new employees "defined benefit" post retirement pensions and health care coverage, but would allow "defined contribution" benefits. The provision would have prevented municipalites from adding even greater employee benefit liabilities after going into debt to cover existing liabilities. The amendment passed by voice vote in the House on December 7, 2006.
  2. Passed 71 to 32 in the House on December 7, 2006, to allow local governments to borrow money to establish a fund to cover up to 75 percent of the current unfunded actuarial liabilities created by past employee contracts that promised government workers lifetime health care coverage without setting sufficient money aside for this. A vote of the people would not be required to authorize the new debt, but it would be subject to a referendum if a certain number of voters signed petitions. The proceeds of the borrowed money would be invested in the same way as pension funds. Local governments would be allowed assume debt for this purpose up to the maximum allowed by state law, which is based on the maximum amount of property taxes they can impose.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on December 12, 2006.
    • Referred to the Senate on December 12, 2006.
    • Amendment offered in the Senate on December 14, 2006, (as agreed and proposed by the "Committee of the Whole), to replace the previous version of the bill with one that establishes some additional conditions for local government borrowing to cover unfunded retiree benefit liabilities. It requires that the local government itself to have a AA credit rating (rather than just the pension obligation bonds); allows bonding for up to 75 percent of the unfunded liability as of the date the bill’s effective date (rather than the date the borrowing plan is established); and requires approval in advance from the Department of Treasury. The amendment passed by voice vote in the Senate on December 14, 2006.
    • Amendment offered by Sen. Gretchen Whitmer (D) on December 14, 2006, to eliminate a requirement that before borrowing to cover retiree health care benefit liabilities a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "manage" health care costs. The amendment failed 18 to 20 in the Senate on December 14, 2006.
      Who Voted "Yes" and Who Voted "No"

  4. Failed 16 to 21 in the Senate on December 14, 2006.
    Who Voted "Yes" and Who Voted "No"

  5. Moved to reconsider in the Senate on December 14, 2006, the vote by which the bill was defeated. The motion passed by voice vote in the Senate on December 14, 2006.
  6. Received in the Senate on December 14, 2006.
    • Amendment offered by Sen. Gretchen Whitmer (D) on December 14, 2006, to eliminate a requirement that before borrowing to cover retiree health care benefit liabilities a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "manage" health care costs. The amendment failed 17 to 19 in the Senate on December 14, 2006.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Gretchen Whitmer (D) on December 14, 2006, to eliminate a requirement that before borrowing to cover retiree health care benefit liabilities a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "control" health care costs. The amendment failed 15 to 19 in the Senate on December 14, 2006.
      Who Voted "Yes" and Who Voted "No"

  7. Failed 17 to 17 in the Senate on December 14, 2006, to allow local governments to borrow money to establish a fund to cover up to 75 percent of the current unfunded actuarial liabilities created by past employee contracts that promised government workers lifetime health care coverage without setting sufficient money aside for this. A vote of the people would not be required to authorize the new debt, but it would be subject to a referendum if a certain number of voters signed petitions. The proceeds of the borrowed money would be invested in the same way as pension funds.
    Who Voted "Yes" and Who Voted "No"

  8. Moved to reconsider by Sen. Beverly Hammerstrom (R) on December 15, 2006, the vote by which the bill was defeated. The motion passed by voice vote in the Senate on December 15, 2006.
  9. Received in the Senate on December 15, 2006.
    • Amendment offered by Sen. Nancy Cassis (R) and Sen. Gretchen Whitmer (D) on December 15, 2006, to eliminate a requirement that before borrowing to cover retiree health care benefit liabilities a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "mitigate the increase in" health care costs. The amendment passed by voice vote in the Senate on December 15, 2006.
  10. Passed 23 to 11 in the Senate on December 15, 2006, to allow local governments to borrow money to establish a fund to cover up to 75 percent of the current unfunded actuarial liabilities created by past employee contracts that promised government workers lifetime health care coverage without setting sufficient money aside for this. A vote of the people would not be required to authorize the new debt, but it would be subject to a referendum if a certain number of voters signed petitions. The proceeds of the borrowed money would be invested in the same way as pension funds. Local governments would not have to reduce future health care costs before taking on this new debt, and would be allowed assume debt for this purpose up to the maximum allowed by state law, which is based on the maximum amount of property taxes they can impose. Note: The Senate defeated the bill twice, and only passed it when an Cassis and Whitmer amendment was added which eliminates a condition that a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "mitigate the increase in" health care costs.
    Who Voted "Yes" and Who Voted "No"

  11. Received in the House on December 15, 2006, to concur with the Senate-passed version of the bill, which eliminates a requirement that before borrowing to cover retiree health care benefit liabilities a local government must "reduce" future health care costs (and liabilities), which would require greater co-pays from government employees, or going to a defined contribution plan for new employees. Instead, local governments would only have to "mitigate the increase in" health care costs. Passed 76 to 24 in the House on December 15, 2006.
    Who Voted "Yes" and Who Voted "No"

  12. Vetoed by Gov. Jennifer Granholm on January 10, 2007.

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