Despite Union Claims, School Pension System is in Trouble

Debt up to $26 billion and climbing

The Michigan Education Association is attacking the idea of changing the public school employees retirement plan by publishing an information sheet with many inaccurate claims.

Michigan Capitol Confidential takes a closer look at the faulty assertions the MEA’s made in its “Lame Duck Alert Pension Attack.”

The MEA wrote: “Ten years ago, MPSERS was fully funded.”

Reality: In 2006, the statewide school pension system known as MPSERS carried $6.1 billion in unfunded liabilities. And that was after state actuaries made changes in their evaluations to make $3.1 billion in unfunded liabilities disappear.

The MEA wrote: “The 2012 law also eliminated retirement health care benefits for new hires.”

Reality: Schools will contribute up to 2 percent of an employee's earnings as a match to employee contributions to retirement Health Reimbursement Accounts. These are owned by the employee and can be used to cover out-of-pocket heath care expenses after an individual stops working.

The MEA wrote: “Now we have an unfunded liability (which has been improving) as the result of the devastating economic downturn of 2008, combined with decisions made in Lansing to balance the budget with unrealistic projected rates of return. Like any investment, it simply needs time to rebound — and is on track to do so.”

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Reality: Unfunded liabilities continue to grow. Last year, the burden grew by another $200 million. Over the past five years, the state added $9.1 billion in unfunded liabilities, and in 2015 total unfunded liabilities reached $26.7 billion.

The MEA wrote: “The changes made in 2012 need time to continue to work. As with any investment, if left alone the system will heal itself.”

Reality: The Legislature made tweaks to the system in 2008, 2010 and 2012. MPSERS’ unfunded liabilities have grown from $8.9 billion in 2009 to $26.7 billion in 2015.

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Participants in the 2016 Detroit Children's Business Fair show their grasp on how markets work. Featured are responses to the such thoughts as hoarding profit for personal gain, penalizing those who earn more and regulating private business.

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