Snyder tells cities to consolidate, reduce employee compensation to win back state aid
Gov. Rick Snyder delivered his much-anticipated message on local government reform today, outlining a series of steps communities across Michigan must take to win back some of the state funding his budget proposes taking away from them.
Snyder said he's asking the Legislature to partner with him on establishing a new "Economic Vitality Incentive Program" to replace the state's current statutory revenue sharing system, which he proposed to be eliminated in his recent budget. Snyder argues the incentive program would encourage municipalities to pursue best practices and cuts costs.
Snyder proposes a complete elimination of nearly $300 million in statutory revenue sharing payments for cities, villages and townships in the fiscal year that starts Oct. 1.
The new program would make a $200-million pot of money available, and communities would have to compete for those dollars based on performance metrics Snyder outlined today. Funding in the program’s first year would be available to communities that were expected to receive more than $6,000 annually under the existing revenue sharing system.
To qualify, Snyder said, eligible municipalities must meet best practices in three categories: accountability and transparency, service consolidation, and employee compensation cost controls. Municipalities would receive one-third of their funding for each category of best practices that they meet, Snyder said.
Communities would be asked to produce a citizens’ guide to the community’s finances by Oct. 1, as well as a “dashboard” to measure performance. Snyder also is calling for addressing employee compensation issues as any union contracts are negotiated, including requiring employees to pay at least 20 percent of their health insurance premiums and placing new hires on less-expensive defined contribution retirement plans.
Snyder said he's also asking the Legislature to amend the Public Employment Relations Act so that the consideration of an intergovernmental cooperation agreement by local governments cannot be considered an unfair labor practice.
The city of Ann Arbor would have to compete with communities across the state to win back some or all of the $1.7 million in state funding it stands to lose under Snyder's plan.
Ypsilanti must do the same for its nearly $1.2 million share of statutory revenue sharing, while Ypsilanti Township has nearly $450,000 in jeopardy.
Ann Arbor Mayor John Hieftje said he's not worried.
"I have a lot of confidence that we would be at the top of the list in our ability to win back some of those funds that are being taken away from us now," Hieftje said. "I would say we would be as well positioned or better positioned than almost any other city I can think of."
In terms of regional cooperation, Hieftje said Ann Arbor has made strides in partnering with the county on information technology services, community development and emergency dispatch operations. He also considers Ann Arbor one of the leaders in the state in terms of cooperating with surrounding municipalities on delivery of fire suppression services.
"What he's offering, I think those are all things we're making progress on," Hieftje said of the governor's plan. "I appreciate the acknowledgment that people should be moving toward greater cost sharing on health benefits, and that's a direction we've been moving strongly toward. And the state Act 312 changes he's calling for are exactly what's needed."
Snyder is asking for collective bargaining reforms, saying Michigan has laws that enable government consolidation and cooperation, but they include clauses that prevent the immediate negotiation of new union contracts. He said the laws should be amended so that upon a merger of services, management and employees immediately begin the collective bargaining process.
Snyder also said he's seeking reforms to Public Act 312, which provides binding arbitration for public safety unions, so that a community’s ability to pay is a fundamental factor in a state arbitrator’s decision. He also said the process should take no longer than 90 days.
Snyder also called today for tasking a work group headed by Michigan Economic Development Corp. Director Michael Finney to assess and align the research, planning and development efforts that currently are scattered across the state so there is better coordination.
The Michigan Municipal League said today it continues to oppose pieces of the governor’s budget plan, particularly the significant reduction in funding to communities. However, overall the League is pleased with the governor’s efforts to give local governments the tools they need to reduce costs and share services. The League also supports the regulatory reforms proposed by the governor, including changes to Public Act 312 and the Urban Cooperation Act.
Business Leaders for Michigan, a nonprofit organization comprised of executives of Michigan's largest companies and universities, praised Snyder's plans. “We applaud the governor for his push to eliminate the barriers that hinder local communities’ ability to stretch every dollar farther,” Doug Rothwell, the group's president and CEO, said in a statement. “Service sharing will not only save money, but reduce the divisiveness that has plagued Michigan from acting in a unified manner in the past.”
For any new, modified or extended union contract, Snyder said today that all public employee compensation should be subject to the following criteria:
- Placing all new hires on a defined contribution plan or a hybrid retirement plan that caps annual employer contributions at 10 percent of base salary.
- Where applicable, a 1.5 percent multiplier should be used to determine employee pensions. A 2 percent multiplier should be used for employees ineligible for Social Security benefits.
- Implementing controls to avoid "pension spiking," such as using a three-year salary average that does not include more than a total of 240 hours of paid leave and overtime to determine benefit levels.
- If health care is offered, all new hires must be on an 80/20 employer-to-employee premium split. Alternatively, a dollar amount could be assigned to local health care plans and compared to the state health care plan if it's an HMO or includes other cost-saving measures such as co-pays or deductibles.
In response to Snyder’s message today, Senate Democratic Leader Gretchen Whitmer issued a statement criticizing Snyder for his apparent double standards.
"I think Governor Snyder needs to first look at the taxpayer-funded raises he gave to certain cabinet members before telling local governments how to cut costs, because otherwise it seems painfully obvious that today’s 'special message' was simply another anti-worker attack by this administration," Whitmer said. "We’re all for reforms, but they must be about providing more efficient services for citizens, not wiping them out."
Snyder said today it's time to create a new opportunity for the merger and consolidation of local governments in Michigan, potentially through creation of metropolitan authorities.
"We should permit open minds across the state to not only enter into collaborations, but to consolidate governmental units and activities as appropriate in their respective communities," Snyder said. "The final decision regarding such consolidation should be left at the local level, but the consideration of such consolidation must not be prevented or discouraged by state government. I will support new legislation that permits the establishment of metropolitan government as a metropolitan authority in Michigan."
Under such legislation, Snyder said, existing county government would be superseded by the new metropolitan government, with all the functions of the county and city performed instead by the metropolitan government. In addition, the legislative and executive powers of the city would be transferred to the metropolitan government, he said.
Snyder characterized his plan today as a series of ideas for transforming government in a manner that will strengthen communities, help rebuild the kind of downtowns and neighborhoods that Michigan needs in order to compete in the 21st century, and promote a sense of cooperation and regionalism across the state.
"I ask the people of Michigan to be open to the idea of sharing critical services and embrace the concept of regionalism so that we can successfully confront the economic challenges facing us today," Snyder said today in a prepared statement.
Snyder noted there still would be $659 million in constitutionally protected revenue sharing payments to local units of government next year under his plan.
The city of Ann Arbor has watched its revenue sharing payments from the state fall from more than $14 million a decade ago to just above $9 million last year. That $5 million drop has led to city service reductions and dozens of job eliminations.
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at email@example.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's e-mail newsletters.