Lansing retirees rally against ‘broken’ healthcare promises

Deb Schenkel spent decades working in a parking ramp collecting fees for the city of Lansing before automated machines put her out of a job. Her scoliosis didn’t slow her down. Neither did her cancer diagnosis. Despite her doctor’s orders, she refused to miss a shift, even at her worst.

After automatic gates were installed, Schenkel, then in her mid-50s, was pushed out into the parking ramp to collect trash and bag meters for special events. Between shifts over a long weekend, she had surgery to remove a tumor on her spine and suffered partial paralysis in her left leg, she said.

“Still, the only time I took off were the days after chemotherapy,” Schenkel added. “I really didn’t fool around. I worked, and I worked hard. I’ve had scoliosis since I was 5 years old. I’ve had the braces, casts, multiple surgeries. I was a tough little bugger. That’s how our parents raised us.”

Schenkel retired in 2013, motivated, in part by a grueling winter’s toll on an aging body. City officials also heavily incentivized her departure by offering her a chance to retain her existing healthcare coverage if she left and left quickly, she explained. Schenkel took the deal.

With pre-existing conditions, no spouse to lean on for alternative coverage and a pension that barely kept her out of poverty, Schenkel said she couldn’t afford to lose her health benefits. And she certainly never expected to see her coverage reduced as Mayor Andy Schor arrived.

Schor made a clear campaign pledge as part of his “vision statement” to “not look to solve our current problems on the backs of city retirees, who spent their careers serving the public and are now on fixed incomes.”

Beginning next year, however, that’s exactly what Schor’s administration intends to do.

About 1,300 retirees, including those formerly represented by Teamsters and the UAW, are slated to have their benefits modified to more closely mirror those of current employees by 2021. Many will see additional out-of-pocket expenses from higher copays for office visits, and prescription drugs and a 20% coverage reduction for some services, including chemotherapy.

City officials said there are too many variations to individual packages to give specific information on the increased costs to retirees. But with higher deductibles and rising caps on coinsurance maximums, they’ll certainly be expected to fork over more cash for fewer benefits.

“It’s a broken promise,” Schenkel added. “I’m scared to death. What if the cancer comes back? This could be devastating. I know there are legacy costs, but this isn’t the way to handle it. It’s all being slammed on the retirees. We’re older folks who are all going to need this coverage.”

Lansing’s unfunded pension and retiree healthcare liability has ballooned to nearly $737 million in recent years. And though city officials don’t keep track of the year-to-year fluctuations, Schor said something needed to be done to get a grip on those rising costs to avoid a financial “crisis.”

The changes to retiree benefits — which were spearheaded by a third-party firm hired by the city last year — are expected to save the city about $8 million annually, officials said. With it, Schor can instead pile more cash into the city’s struggling general fund to float other services.

City officials have painted the maneuver as a necessity. The latest city budget trimmed millions of dollars in expenses and still brought its rainy-day reserves to an all-time low to offset decreased state revenues and plummeting income taxes amid the COVID-19 pandemic.

The changes offered the “most savings and least changes for retirees,” officials, including Chief Strategy Officer Judy Kehler, said in an email answering questions posed by City Pulse. It also aligned with a direct recommendation from the city’s 18-member Financial Health Team to take immediate action in order to drastically reduce unfunded legacy costs.

As for broken promises? Schor refused to directly acknowledge the concept in an email to City Pulse, except to note that retirees could be much worse off. At least they have benefits, he said.

“There were other, more extreme options presented to me that I soundly rejected, including a plan to completely eliminate health care benefits for retirees and going to a monthly stipend,” Schor said this week. “The current plan is the best option to ensure that the city of Lansing does something to reduce our high unfunded liability with the least impact to our retirees.”

City officials said union leaders gave feedback and were “given notice” of the changes before retirees were directly informed. The Lansing City Council — which remains largely powerless to intervene — was only filled in afterward after hearing the news secondhand.

Empowered by a Michigan Supreme Court decision last year from Macomb County, Schor’s administration insists that unilateral changes to promised healthcare benefits are entirely legal.

That class-action lawsuit (from thousands of retired Macomb County workers) ultimately set a new legal precedent in Michigan. City officials have interpreted that ruling to mean that union contracts don’t promise a vested right to lifetime and unalterable retirement healthcare benefits.

It also means that city officials needn’t bargain with unions to make those decisions, Schor said.

“Public unions don’t negotiate for retirees,” city officials said in its email response to questions.

After confidential conversations with city officials and union leaders about planned benefits changes leaked to plan holders last month, criticism over the changes hit a boiling point. Union leaders complained about being cut out of the process. Several dozen retirees rallied against Schor in front of City Hall.

“Union lives matter,” one sign read. At least two other posters called for Schor’s resignation.

“Really, this all boils down to how this was done,” said Mark Parker, city retiree and rally organizer. “If the city had actually sat down and negotiated with us in good faith, we might be in a different place right now. Even Virg Bernero would usually speak to us. Schor has been silent.”

Dozens of retirees, like Schenkel, have voiced concerns over the upcoming benefits changes. Many are fearful of the unknown and — like City Pulse — have had trouble finding detailed information in plain language about increased costs or reductions in coverage from city officials.

For some with frequent medical needs, even an extra $10-30 per visit or prescription can be a hardship, they said. The city opened a fund that offers $1,000 to those who make less than $25,000 annually. Many won’t be eligible. For those who are, it only helps soften the blow.

“I don’t have to pay anything for generic prescriptions right now, but with these copays, it could add up to be a lot,” Schenkel added. “We also have to look at costs for doctor’s visits and emergency room costs. You never know what could happen. That sense of security is gone.”

Others fear that a group of loosely organized city retirees — some who no longer live in Lansing, don’t pay local taxes and won’t vote in the next mayoral election — are posing far too easy of a target for budget cuts. And Parker said that Schor has only opened the door to more.

“This also leaves open the possibility that any future mayor can come in and totally gut our benefits,” Parker added. “This truly opens a Pandora’s Box. If they get away with this, the city can go and stick their hands straight into retiree benefits anytime they’re running short on cash.”

Parker and a group of about 800 retirees are planning their next steps on a private Facebook group. That could include an attempt to secure a court-ordered injunction that would delay the changes and provide some “breathing room” while retirees chart next steps, he said.

The City Council has also tried — and sometimes failed — in recent weeks to field retiree concerns. Multiple online meetings designed to solicit retiree feedback have been canceled. But even if they were opposed to the change, the Council finds itself legislatively unable to stop it.

“These changes are not something that requires City Council approval,” said Council President Peter Spadafore. “I understand there’s a lot of angst and concern, and these meetings are the public’s mechanism to redress the government. I’m not going to discourage anyone from speaking out on this, but it’s also not the most appropriate place for questions and answers.”

Spadafore declined to say whether it was the “right or wrong move” to reduce retiree benefits, but said he’s also open to suggestions for alternative ways to reduce unfunded legacy costs.

Council members Brandon Betz and Patricia Spitzley weren’t thrilled to hear about the planned benefits changes from Schor’s administration. But they also recognized an inability to stop them.

“Had this been an inclusive process, we would have been able to come to some agreement that folks could live with while also saving the city money moving forward,” said Council Vice President Adam Hussain. “I’m also concerned this move is occurring amid a global pandemic.”

Former Mayor Virg Bernero — a potential challenger to Schor in next year's mayoral election — also voiced criticism: “Retirees should only be impacted by budget cuts as an absolute last resort, after every other avenue has been pursued. The city’s budget issues must be tackled WITH city workers and unions, not imposed on them from on high.”

Schor said the decision to tweak retiree health benefits has already been made. And while his administration is “always open” to alternatives to save the city some cash, no other proposals to trim unfunded retiree obligations by $8 million annually have emerged.

“This doesn’t solve the problem,” Schor explained to City Pulse. “It is one of a few steps that we are taking to lessen the burden on the city so that we can ensure that we provide services and are able to pay pensions in the future. We are paying our legacy costs in a variety of ways.”