The Senate on Thursday passed a $56.1 billion budget with $542 million left over – money that Sen. Curtis Hertel (D-East Lansing) proposed should be spent on fixing the state’s deteriorated roads. His amendment failed 18-19 – with seven Republicans joining Democrats voting in favor. Republican leaders in both the House and Senate have said their top priority for those hundreds of millions of dollars is to close the defined benefit retirement system (MPSERS) to all new school employees.
“That has been my absolute top priority since the day I was elected speaker of the House,” Rep. Tom Leonard (R-DeWitt) told reporters last week. “So if that’s an avenue we can go, if that’s something we can get accomplished, I’m ready for it.” Keep in mind – the $500 million in additional money required this year to close MPSERS to new hires is only the beginning. The extra costs of shifting new school employees to a defined contribution system, such as a 401(k), would continue for decades.
Just this week, two separate studies were released that projected the costs of eliminating pensions for new school employees. Great Lakes Consulting, commissioned by the legislative news service MIRS, estimated the price tag at $20 billion over 30 years.
Anderson Economic Group, hired by the Michigan Association of School Administrators to conduct a study, additionally found dramatically higher costs for school districts of $100 billion over the current amortization schedule through 2048.
The state’s own fiscal experts peg the added financial burden of closing the system at $3.6 billion over the next five years — with costs of up to $26 billion in the next few decades.
“Too much work has gone into stabilizing MPSERS and paying down its unfunded liabilities, while also reducing costs for the state and for school districts,” said Chris Wigent, Executive Director of the Michigan Association of School Administrators. “These proposals will undo all the progress that has been made and kick the can down the road, guaranteeing that a future legislature will have to fix the problems this will create.”
Significant changes were already made in 2012 that eliminated retiree health care and placed new school employees into a “hybrid” system combining elements of both a traditional defined benefit pension and a 401(k)-style defined contribution plan. The hybrid system is fully funded.
Last December, GOP leaders tried but failed to rush a pension-busting bill through the lame duck legislative session – but their own Republican colleagues balked at the costs involved. We need to drive that message home again – and add in the fact that continuing attacks on teachers and erosion of school employees’ pay and benefits is contributing to teacher shortages that threaten our children’s future.
Act now to stop this pension attack that threatens the future of public education in Michigan – contact your state Senator and Representative TODAY.