On Tuesday, the Senate approved a bill aiming to change spending rules for the state’s school retirement system in a way that would increase taxpayers’s obligations by $1.4 billion. It would do this by letting lawmakers divert savings from pre-funding health care for retired school employees, currently $630 million annually, from paying down pension debt in the school retirement system to other purposes.

Senate Bill 911, introduced by Sen. Kevin Hertel, D-St. Clair Shores, would reduce the required contribution rate the state assesses on school districts. To prefund pension benefits and pay off pension debts, the state charges districts based on their payroll. The bill would reduce the rate assessed from 20.96% of payroll to 15.22%.

The bill passed the Senate Sept. 17 on a 20-16 party-line vote, with Democrats voting yes and Republicans voting no. Two Republican senators did not vote. The bill will be sent to the House for concurrence on Sept. 25.

If the $630 million is not applied to the underfunded teacher pension debt, taxpayers will have to pay another $1.4 billion in taxes over 14 years. That span covers the current trajectory required to fully fund the Michigan Public Schools Employees Retirement System, according to the Reason Foundation.

Hertel did not respond to an email seeking comment.

“The state accidentally made teachers its biggest creditor when it underfunded pension benefits,” said James Hohman, director of fiscal policy at the Mackinac Center. “This is unfair to teachers and taxpayers alike, and this bill further defers paying down pension debts.”

Redirecting the money would help districts, say the bill’s supporters. Funds could be used in other ways. Sen. Dayna Polehanki, who chairs the Senate Education Committee, wrote on social media, ”The passage of Senate Bill 911 today will permanently redirect $600 million from MPSERS back to schools!” MPSERS is the retirement system for school employees.

The change would permanently “steal from the teacher pension fund,” Sen. Aric Nesbitt, R-Porter Township, posted on social media.

Hundreds of servers rallied at the Michigan Capitol on Wednesday, urging lawmakers to “Save MI Tips” by altering upcoming changes to the state’s labor laws.

Grabbing a takeout meal or eating in Michigan restaurants next year will likely cost roughly 25% more under new minimum wage and paid sick leave rules set to take effect Feb. 25, according to a restaurant industry survey.

Restaurant owners and operators will bear higher costs next year because of a July 31 Michigan Supreme Court decision that let stand a policy of enacting a higher minimum wage, paid sick leave requirements and the phaseout of the tipped credit.

Brooke Champt works at a restaurant in Elk Rapids. She traveled to Lansing to urge lawmakers to fix upcoming changes to paid sick leave policy, the phaseout of the tipped credit and the minimum wage increase,

Champt has worked off and on in the service industry since 2006. Even after getting a master’s degree in social work, she returned to serving once she had a family. “The money is better,” she said,

With a tipped wage in place, Champt could work 30 hours in the service industry and make wages similar to or better than what she could by working 80 hours weekly as a social worker.

“I get to work fewer hours, enjoy more of my time with my family, and still be able to support a household,” she told Michigan Capitol Confidential.

Stores with a long history – not just bars and restaurants – have decided to close in Bay City because of the new rules, Rep. Timmy Beson, R-Bay City, told CapCon in an interview.

Bars and restaurants must offset these new costs by using kiosks or getting more takeout business unless the Legislature changes these rules, Beson said.

“When we lose our hospitality industry, our bars and restaurants, our small businesses because they can’t afford to be here anymore, there are going to be fewer people coming into our state. We’re going to get a bad name for not having enough places open,” Beson said.

Jeff Lobdell owns 22 restaurants and two hotels in Michigan. He said the new paid sick leave and minimum wage rules will devastate the hospitality industry.

“Everyone will have to adapt. Restaurants operate on a razor-thin margin,” usually between 3% and 9% of revenue, Lobdell said.

The new mandates will likely raise costs to restaurants by 20%, forcing restaurants to either dramatically raise prices, cut tipped employees’ hours, or go out of business, Lobdell said in a phone interview with Michigan Capitol Confidential.

He said the Legislature needs to “act swiftly” to keep the tipped credit and “reasonable rules” for paid sick leave.