LANSING – After months of debate and several failed vote attempts, the Legislature passed a retirement incentive for state workers on Thursday that is the linchpin in wrapping up most of the outstanding 2010-11 budget bills.

The struggle to pass SB 1226 was different than when the Legislature passed a similar plan for school employees back in May, but also similar in a way because it took the entire House Republican Caucus to help Democrats over the 54-vote threshold for passage.

But the final 60-45 vote was much larger than had been expected.

Critical to winning House Republican converts was a change in the requirement that workers pay 3 percent of their salary toward retirement health care costs starting in November and running through September 30, 2013. House Democrats had tried a version of gradually phasing the mandate up to 3 percent over four years, but Republicans had balked, saying it would leave crucial savings to the state on the table.

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But whether the legislation, which still has to win immediate effect in the Senate after Democrats blocked it there, spurs enough retirements or is bound up in the courts, similar to the school employee piece, remains to be seen.

An official from the United Auto Workers Local 6000, which represents the largest group of state workers, said it was likely a lawsuit would be filed challenging the retirement bill once it becomes law.

While triumphant in holding up his end of the budget bargain, House Speaker Andy Dillon (D-Redford Twp.) once again found himself at odds with the majority of his caucus in passing the bill.

Dillon said tough votes like this “are never easy,” and that he hoped it was the last time Democrats would be divided as they were.

“It’s not my favorite thing to do,” he told reporters. “Without this (though) three of the five budgets were immovable.”

Eighteen Democrats, including Dillon, joined Republicans on the vote: House Majority Floor Leader Kathy Angerer (D-Dundee), Rep. Tim Bledsoe (D-Grosse Pointe), Rep. Pam Byrnes (D-Chelsea), Rep. Marc Corriveau (D-Northville), Rep. George Cushingberry Jr. (D-Detroit), Rep. Fred Durhal Jr. (D-Detroit), Rep. John Espinoza (D-Croswell), Rep. Lee Gonzales (D-Flint), Rep. Shanelle Jackson (D-Detroit), Rep. Bert Johnson (D-Highland Park), Rep. Gabe Leland (D-Detroit), Rep. LaMar Lemmons Jr. (D-Detroit), Rep. Tim Melton (D-Auburn Hills), Rep. Roy Schmidt (D-Grand Rapids), Rep. Joel Sheltrown (D-West Branch), Rep. Jim Slezak (D-Davison) and Rep. Dudley Spade (D-Tipton).

Rep. Vincent Gregory (D-Southfield) and Rep. Bettie Scott (D-Detroit) were absent for the vote.

Dillon said the idea of putting a sunset on the health care payment was an idea of one of the unions, which he declined to name.

Ray Holman, spokesperson for the UAW Local 6000, said it wasn’t their union that proposed it.

While the group is happy more state workers who want to retire will be eligible to do so, the legislation is still flawed.

“It’s a backdoor way of giving us a concession,” he said. “We should have been taking this to the bargaining table.”

Republicans lauded their holdout in earlier votes on the bill, saying it led to the change in the health care contribution, which then saves the state $120 million more over three years than the phase-in version would have.

“We treated employees the same,” Rep. James Bolger (R-Marshall) said of state workers and school employees.

Voting on the legislation started around 5 p.m. after the 3 percent health care contribution for three years was added to the bill, but at 46 votes, the issue was stuck for nearly an hour.

Legislative leadership, including Senate Majority Leader Mike Bishop (R-Rochester), and State Budget Director Bob Emerson, huddled in front of the rostrum.

After the vote board was cleared, word began to spread that the Senate had come up with a technical amendment that needed to be added to the bill. After pushing through the dinner hour with no official break, the House took the bill up again just after 8:30 p.m.

Rep. Mark Meadows (D-East Lansing), who had sought to eliminate the 3 percent contribution, as well as increase the multipliers even more, withdrew some amendments he had pending.

It didn’t take nearly as long to pass the bill this time around and Republicans clapped vigorously after the measure passed.

The Senate quickly followed the House vote with a 20-14 party-line vote to pass the revised version of the bill, but Senate Democrats held up sending the bill to Governor Jennifer Granholm by withholding votes for immediate effect.

Twenty-six votes are required for immediate effect, but there were only 22 yes votes. Two Democrats – Sen. Jim Barcia of Bay City and Sen. John Gleason of Flushing – joined the 20 Republicans were present in support. The other Democrats did not vote.

Senate Minority Leader Mike Prusi (D-Ishpeming) left the Senate floor without speaking to reporters and declined to take questions about why he and most Senate Democrats opposed immediate effect. Prusi spokesperson Alex Rossman said most Senate Democrats simply opposed the early retirement legislation and so they also opposed implementation of it. But he also said events will have to play out next week.

If an agreement cannot be found on immediate effect, then the law would not take effect until 90 days after the Legislature adjourns sine die, meaning the effective date would be sometime in mid- to late-March.

Senate Majority Leader Mike Bishop (R-Rochester) said Senate Democrats were obstructing a needed piece of the budget deal.

“They’ve just stood in the way of $88 million in savings to state government,” he said. “It’s a breach of the target agreement.”

Rossman noted that Prusi did not sign the target agreement.

Bishop said with Granholm and her staff not available there was no point in holding the Senate in any later.

“We’ll come back on Tuesday and figure out if the governor worked her side or not,” he said, adding he would work for Democratic votes as well.

Bishop said he was pleased with the outcome of the bill.

“I think it looks great. We worked hard to get that done,” he said. “I give Andy Dillon and his caucus credit. I give the House Republicans a lot of credit because they worked together to craft something that was acceptable to all of them, or at least would pass.”

Of the lack of long-term revenue stability because of the three-year phaseout, Bishop said, “The next administration could come in and delete that sunset just like that, and I think they will. Call it a hunch.”

Budget Director Bob Emerson said House passage of the retirement legislation means the end is in sight for the budget.

“This was an important decision that had to be made to balance the budget,” he said. “I think it was a fair proposal.”

Emerson credited Dillon and House Minority Leader Kevin Elsenheimer (R-Kewadin) with forging the compromise.

“The speaker worked very hard,” he said. “The minority leader was very helpful in trying to make sure things did not totally fall apart after things did not go very well yesterday.”

Emerson said he had no idea why Senate Democrats refused to support immediate effect. “They’ll have a chance on Tuesday, I’m sure, to work on immediate effect,” he said.

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