School Budgets, Senate Pension Reforms Under Attack From Pension System

System costs Birmingham schools 60 percent more, but managers say don’t touch it

The Michigan Senate Appropriations Committee has advanced a bill to reform the state-run school pension system by giving future employees 401(k) contributions instead of lifetime pensions. Years of persistent underfunding by state officials has led to the system having a current unfunded liability of $26.7 billion.

Defenders of the status quo system, including its managers and teachers unions, are fighting back with claims of “transition costs.” Some say the bill is “a solution in search of a problem.”

Michigan’s public school districts are where the growing burden of pension costs is most visible. Birmingham Public Schools is one example out of hundreds. The district’s share of the pension system’s costs has risen 60 percent in just the past two years.

In 2014, Birmingham’s pension payment to the state was $11.0 million. Just two years later, the district must pay $17.6 million. Most of that increase represents the cost of catching up on past underfunding. If this is not corrected then eventually there will not be enough money in the system to pay people's pensions. While the catch-up payments pass through many government accounts, the money all comes from the same place — state taxpayers.

The general fund operating budget for Birmingham Public Schools was $117.1 million in 2016.

Stay Engaged

Simply enter your email below to receive our weekly email:


There aren’t many policies that get near unanimous support from economists, but free trade is one of them. Despite this, a central theme of the 2016 presidential campaign, heard from both political parties, was that free trade was somehow harmful to the United States and corrective action was needed. Mark Perry, an economics professor at the University of Michigan-Flint and scholar with the American Enterprise Institute, makes the case for why President Trump’s assessment of free trade is misguided.

Related Sites