Other laws that would save state tax dollars would also be in jeopardy if Proposal 2 passes. The magnitude of the future savings associated with these laws is uncertain; many long-term savings cannot be predicted on a per-year basis. Laws of this nature include the following.
Emergency Manager Law
As discussed above under “Public Act 4 of 2011: The ‘Emergency Manager’ Law,” an emergency manager of a financially stressed municipality or school district can request approval from the Department of Treasury to amend union collective bargaining agreements under specified criteria. If Proposal 2 passes, emergency managers would be denied this option.
Reports from the Treasury show that the emergency managers’ amendments to collective bargaining agreements with government-employee unions in Flint, Pontiac and Detroit Public Schools have already saved taxpayers $100 million. While the emergency manager law will certainly save taxpayer money over the long term, an exact estimate of future savings is unknown.
As discussed above under “Government-Employee Health Benefit Reform,” former Gov. John Engler’s 1996 initiative to close the state’s major defined-benefit plan for state government retirees might be amenable to legal challenge if Proposal 2 passes. The 1996 pension reform has saved taxpayers from incurring $2.3 billion to $4.3 billion in additional unfunded liabilities since 1997, according to a 2011 Mackinac Center report. The future cost of reopening the pension plan to new entrants or otherwise overriding the 1996 reform is unknown.
Public School Retiree Health Care Cost Sharing
In addition to the savings mentioned above under “Public School Employee Pension Reforms,” there are savings from recently passed school pension fund reforms that lowered the calculated financial burden of the retiree health care benefits currently offered to school employees and retirees. This represents a $7.1 billion decrease in taxpayer payments to the system, according to a state fiscal analysis. If these reforms were overridden by union contracts under Proposal 2, state taxpayers would lose these savings.
Other State Employee Pension System Reforms
Last year, the state required its employees to contribute more money to cover the cost of their own pension and retiree health care coverage — benefits largely unavailable in the private sector. According to a state analysis, this increased responsibility is expected to save taxpayers $82 million and $56 million annually for retiree health care and pension benefits, respectively. While these reforms are currently subject to litigation, these taxpayer savings would be automatically be subject to nullification through collective bargaining under Proposal 2.
Hence, Proposal 2 would cost Michigan taxpayers conservatively $1.6 billion annually in current and scheduled taxpayer savings — but that number likely underestimates the full financial impact. What is certain is that government-employee union authority will be fortified against the claims of taxpayers’ elected representatives.