A news service for the people of Michigan from the Mackinac Center for Public Policy

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School District Links Retiree Benefits Funding To Salary Schedule

Superintendent says deal done to protect taxpayers

The Dearborn Public Schools teachers' union contract has a rare clause in it that links costs of retirement pension and health care to teacher pay.

The Michigan Public Schools Employees Retirement System covers the defined benefit pension and the retiree health insurance. The percent of payroll school districts must pay to cover MPSERS’ cost has increased. It has jumped from 3.22 percent of payroll in 1984 to 29.35 percent in 2013-14. School districts are required to pay 24.79 percent. The state of Michigan pays 4.56 percent of the MPSERS’ bill. The cost has increased because MPSERS faces $24.3 billion in unfunded liabilities.

The contract states that any increase in the MPSERS rate above 25.91 percent results in decrease in the salary schedule of one-third of the percentage increase. The contract states that if the MPSERS rate jumped 1 percent, the salary scale would decrease 1/3 percent.

Dearborn Superintendent Brian Whiston said all of the district's union contracts deal with the increasing costs of MPSERS one way or another.

"It was to protect us (taxpayers)," Whiston said in an email.

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, said other school districts should consider negotiating protections from rising MPSERS costs.

"MPSERS has shown no signs of decreasing its rates despite recent reforms," Hohman said. "This is a way of dealing with the increasing demands of MPSERS due to underfunding."

Dearborn Federation of Teachers President Chris Sipperley didn't respond to a request for comment.

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See also:

Five Options for Addressing 'Transition Costs' When Closing the MPSERS Pension Plan

Public Pension System Totally Broken

Teacher Pension Whole Getting Deeper

Pension Study Consultants Have History Defending Expensive Pension Plans

House GOP Hides Behind Rigged 'Study'

GOP Fumbles: On Verge of Giving MEA Huge Pension Win

The State Is Already Addressing 'Transition Costs' in School Pension Fund

Commentary: Shifting School Employees to a 401(k) Is the Most Important Thing

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