Bolger Speaks Out on his Pension and Road Proposals
April 25, 2014
Dome: “Where did the idea of Unions contributing to the pension bailout come from?”
Speaker Bolger: “Last week I restated my longstanding request that the unions join us at the table to help resolve the bankruptcy in Detroit. I am limited somewhat by what I can talk about from private conversations. But, what I can point to are the public conversations. The Governor, the Majority Leader and I put on the table a settlement offer for Detroit of $350M last January 23rd. On January 24th, MIRS news service reported that I had talked about unions contributing financially. In fact, the response from AFSCME was printed at that time. So, while I can’t talk about private discussions, I can point to the day that there was also public discussion of the request that unions participate financially—materially—in the settlement. I have been clear with my colleagues from the beginning—both Democrat and Republican; in Lansing and in Washington, D.C.—that this is something I feel is important.
What we’re facing in Detroit is what amounts to years of the Wimpy character from Popeye: “I will gladly pay you Tuesday for a hamburger today.” Well, we’re way past Tuesday…and there were many people who participated in the making of those promises that could not be kept. Management and labor negotiated those agreements. The unions received union dues from the contracts that weren’t affordable and then put those dues into their own reserves.
Today we have at the table management, taxpayers—statewide taxpayers—participating in the discussion involving the state’s contribution of $350M. We do have retirees who are making significant sacrifices and accepting reductions. Beyond that we have organizations like the DIA who played no part in any contractual agreement yet remain at risk with Detroit’s bankruptcy. The DIA has stepped forward. We have the foundations in Michigan—and nationally—who had no part in the [contract negotiations] and were not at any risk at all, yet they’re also stepping forward.
But what we don’t have so far is even the offer of a contribution from the unions themselves.
What I find shocking about the current conversation is that the unions would be offended by my request that they come to the table and join in the resolution. I would have thought that with so many people eager to minimize the impact on pensions, the unions would have been eager to minimize the impact on their own members—the retirees—that they represented.
Put another way, why is it unreasonable for taxpayers to expect material participation from the unions that built their reserves from the dues generated by the contracts they negotiated? Especially given the contributions from so many that had nothing to do with creating the problem: Taxpayers from Marshall, the DIA and the many foundations that are stepping forward. I would have thought that the unions would be eager to minimize the impact on their own pensioners. I was shocked and disappointed that they rejected that, and reacted by somehow being offended that they were asked to be part of a solution.”
Dome: “What do you say to those that point out that with the implementation of Right to Work, unions will no longer have the funds available to contribute?”
Speaker Bolger: “I think that most of those unions that are involved are not yet impacted by Right to Work because Right to Work doesn’t take effect until existing contracts expire. I would also add that we’re talking about years’ worth of promises [contracts] that couldn’t be kept, and years of dues collections resulting from those promises that couldn’t be kept…long before Right to Work was even considered.”
Dome: “What is your response to those that contend that unions have already contributed by way of wage and benefit reductions and freezes over the years?”
Speaker Bolger: “Again, their own members are contributing. Their own pension members are contributing to this settlement. But their [union] reserves—thus far—have not. The unions’ own reserves, built from the contracts that they negotiated. And, once again, I would ask what it is that is so unreasonable about this; so many others are willing to step forward to offer from their reserves to reduce the impact on the pensioners…where are the unions with their reserves to help put Detroit on the path to success? Which, by the way, I believe will help the entire state of Michigan.”
Dome: “Is your Caucus demanding that unions contribute before they are asked to approve the State of Michigan’s $350M portion of the, “Grand Bargain?”
Speaker Bolger: “I have certainly received a lot of interest on this from my Caucus. But, my caucus is made up of members from the entire state of Michigan and they take that possibility [contributions from union reserves] very seriously.
They raise a very simple question: ‘Why should taxpayers from across the state of Michigan write a check for a bankruptcy that they had no role in creating?’
Given the situation, there are many reasons for them to do so. We have to evaluate the entire situation. That said, I do think that a very reasonable question for my Caucus to ask is, ‘Is everybody at the table? Is everybody sharing in the sacrifice?’ Especially with regard to those that helped create the problem. Thus far, it seems that most of the chairs at the table are filled, but with one glaring exception: The union organizations themselves.
They [the GOP Caucus] have also observed and inquired about the so-called, ‘Moral hazard.’ The ‘moral hazard’ is the specter of such a settlement perhaps triggering other communities to say, ‘Why not us?’ I think the list of reasons that a community shouldn’t declare a bankruptcy is long, but I also think that making sure everyone is at the table that should be to resolve the problem is important.
Dome: “What if the unions refuse to contribute?”
Speaker Bolger: “I’ve been asked many times over the last week if this is an ultimatum…what the minimum amount would be. This [contribution from union reserves] is a very important factor: When we are faced with the full settlement, when we are able to see what the full settlement looks like, when we are able to delve into all of the conditions to ensure that we don’t face a moral hazard and that this will fully resolve the bankruptcy for the people of Detroit as well as the people of the state of Michigan, then we will evaluate the entire picture. I think that the unions not participating would be a glaring omission, and I think that it would adversely affect our ability to move forward in good conscience. I hope it doesn’t come to that. However, if it does come to that, it will be entirely the unions’ doing and not ours.”
Dome: “Does Legislative passage of the state’s contribution to the so-called ‘Grand Bargain’ have an expiration date?”
Speaker Bolger: “I want to make this point clear: While I’ve been consistent from day one, there are too many people that do not seem to be taking this seriously. There are many people that have been ignoring what I’ve been saying…they appear to be waiting it out. They [the unions] would engage when a deal is imminent and then, when it isn’t present [contributions from their reserves], they’d want us to look past it.
This is an important issue and it is not something we will look past.
We’re not ready until the solution presented fully resolves any potential liability for the state. There have to be a lot of things put together. While we’re crafting legislation to make sure this holds true, we can’t entertain proceeding with a settlement until we know there is a settlement.
There has been some conversation about what comes first, the chicken or the egg? But, in private life, while you would want to write the check to settle the lawsuit, you wouldn’t write that check until you knew that writing it would actually resolve the lawsuit. Right now, there are some who are saying that the Legislature ought to act first and learn about the settlement later. That’s not the way this should operate, nor is it the way it will operate. It’s up to the courts to assure us that this is a full settlement and that we wouldn’t be writing a check funded by Michigan’s taxpayers…only to face future litigation.”
Dome: “What about the fact that Mr. Orr—Detroit’s EM—will be leaving on a date certain?”
Speaker Bolger: “I think that with regard to the settlement, it is reasonable to ask, ‘What is the possibility of reaching an agreement after his departure’? That’s when you start looking at what happens after the settlement. If there is no settlement until after Orr’s departure, it does put at risk the DIA. It does put at risk the retirees, so I don’t think that’s the way to go. I continue to believe—as I stated last January 23rd—a settlement is in the best interest of Detroit and the state of Michigan. But, it’s gotta be done right. There are a lot of dates between our conversation today and Orr’s exiting.
I do think that it would be very difficult to envision how a settlement could happen after Kevyn Orr was no longer able to negotiate.”
Dome: “The reviews on this have been mixed. Is this a partisan issue, Mr. Speaker?”
Speaker Bolger: “Many people have asked, ‘Is this politics?’ There is a long history of Democrats from Detroit playing against the rest of the state, and Republicans from the rest of the state playing against Detroit. I have been clear, and at no time in my leadership in the House have we made this an, ‘us vs. them’. At no time have we campaigned on ‘Detroit’.
If this were political, if I were seeking to make Detroit a political play, then I would be seeking to oppose Detroit. I would not be stepping forward with the Governor to propose a settlement and solution for Detroit. It would be easy politically for me to run Republicans against Detroit. We’re not doing that because I firmly believe that the state’s success is impacted by Detroit‘s success. I believe that to maximize the state’s success, we need to maximize Detroit’s success.”
Dome: “Are you concerned with oversight once an agreement is reached? If so, what system or structure do you wish to see put in place?”
Speaker Bolger: “Absolutely. I think we have to ensure that there is professional management of the pension funds. We have to remember that there has been a combination of mismanagement and poor decisions as well as alleged criminal activity. There have been charges brought forward against several people involved in the pension funds. We have to make sure that that cannot happen again. We have to make sure that there aren’t contracts negotiated that cannot be afforded in the future.
Now, I look to the New York City model. NYC faced potential bankruptcy in the 70’s; they entered into long term agreements to avoid that bankruptcy, but that included oversight. That included state oversight. That is an important model for us to look at. It won’t be exactly like NYC, but something like that is essential. We have to make sure that while we respect Detroit’s autonomy, we remember that state taxpayers have been involved, and that therefore state taxpayers must be protected from the possibility of the same mistakes being made again.”
Dome: “Any thoughts as to who would make up the entity charged with overseeing the pension funds going forward?”
Speaker Bolger: “Well, not yet. We’re starting to work on those details and will continue to work on those details. Again, looking at the NYC model and adapting that to a Michigan solution. There are many different options that could work. I think the overarching concern, though, is making sure that Detroit maintains its autonomy. But, that the investment made by taxpayers statewide is protected and ensures Detroit’s success.”
Dome: “Where are the Governor and the Senate Majority Leader on your proposal?”
Speaker Bolger: “They both commented today [Wednesday, 4/23]. I don’t speak for other people. The Majority Leader said that he is not as ‘adamant’ as I am, but that he understands and respects my position. The Governor said that [union contribution] was not one of his conditions, but that this was part of the, ‘…normal legislative process’. Obviously, whatever passes would have to pass the House, the Senate and be signed by the Governor. We all bring different perspectives. We listen to, and respect each other. We all understand that there have to be 56, 20 and 1 for the state to be involved in the settlement [majorities in the House and Senate, then the Governor’s signature on the bill].”
Dome: “What is the dollar amount that Unions have to kick in to be, ’material?’”
Speaker Bolger: “I asked them to come forward. They need to look at what everybody else is doing. They can quantify what the state is doing in relation to the state’s reserves. They can quantify what the foundations are doing in relation to their reserves. They can quantify what the DIA is doing compared to the DIA’s reserves. They understand the reduction that their own members are facing. I would ask them to put their offer in perspective and look at the others that are at the table making contributions to the settlement of the bankruptcy. So, I leave that figure to them to decide and to defend.
Dome: “Prior to renewing your call for action, had you heard from union leaders?”
Speaker Bolger: “I haven’t for several months and that’s the reason that I restated my position because, as I said, I had strong concerns that while I had repeatedly raised the issue in private conversations, people weren’t acting on it. That they were seeking to ignore this until the end and pretend that it was never presented. I thought it best to reassert this now rather than to let things continue, only to have them [Union leaders] act surprised later.”
Dome: “Have you been contacted by any Union since last week’s press conference?”
Speaker Bolger: “No. I have not heard from anyone. I had heard before I restated my position that this wasn’t very well received. Again, I want to stress that I’ve had many private conversations with people here in Lansing and in Washington, D.C., but no one has given me any indication that any progress has been made, or that anyone is pursuing this very seriously. I have to be careful about what I reference; I’m limited to what’s been stated publicly and on the record.”
Dome: “Have you heard from Mayor Duggan on this?”
Speaker Bolger: “I have not on this. No.”
Dome: “Is there anything else that you would like to say about this issue?”
Speaker Bolger: “I have great empathy for the retirees. They are in an impossible position because their organizations [unions] and management entered into contracts that everyone should have known could not possibly have been afforded. I would have thought the unions would have been glad to step forward and partner on this. But, instead, I’m seeing obstinance and—I think—phony surprise. There seems to be a lack of genuine desire to step forward thus far.
That can change…I hope it does change.”
Dome: “Switching gears, are you satisfied with how the budget is progressing?”
Speaker Bolger: “Yes. We’re moving along. It is a nice situation to be dealing with surpluses rather than deficits. We’re building our road-funding proposal with existing resources and without applying any new resources. We’re continuing to add to our savings account and pay down long-term debt. We’re continuing to add investment in education. The budget is moving along chronologically very well.”
Dome: “You recently proposed allocating $500 million for road repair. How is your proposal coming along?”
Speaker Bolger: “After so long of no movement, there has now been activity. The Quadrant was meeting regularly, but once the poll numbers came back, everything stopped. Now there are bills in committee. The committee can now begin debating and moving those forward. The proposal was announced a little less than three weeks ago now and yet we already have bills in play. We have committees meeting and we have Legislators working on their bills. I am receiving a lot of bipartisan encouragement to move forward.”
Dome: “Do you have the support of organized labor?”
Speaker Bolger: “Yes. Shorty Gleason [former President of the MI Construction and Building Trades Council] has been there, with the caveat that many others give and that is that this is only a start and not the entire solution. I respect that and I agree. It is a solid foundation upon which we can build. If they [the Legislature] in 1997 had done what I’m proposing today, we wouldn’t have a shortfall on our roads. We would have good roads in Michigan and we would have proper upkeep.”
Dome: “Do the Governor and Majority Leader support your road funding proposal?”
Speaker Bolger: “The Governor has spoken very positively. He has said that he continues his call for more. This proposal calls for $500 million, but we need between $1.2 and $1.3 billion. The Senate has said that they appreciate our putting something on the table and that they will consider it once it gets over there. I have said all along that I recognize that this is not the full solution, but I’ve also said all along that I welcome improvement in committee, the House Floor and, if and when the Senate considers the package. This is not a, “take it or leave it” roads proposal. This is a proposal to get things started and, should others have other ideas to improve it, I welcome those.”
Dome: “This package is bipartisan?”
Speaker Bolger: “This proposal is the direct result of the hard work of myself, Minority Leader Tim Greimel and Minority Transportation Vice-chair Marilyn Lane. I am hoping for strong bipartisan support for this as it moves. The package includes several Democrat bills.”
Next week, Speaker Bolger shares his thoughts on this year’s campaigns and the politics behind them, as well as a few words about the upcoming “Lame Duck” session.