Teacher Pension Poverty Claim Warrants Scrutiny

MEA article said teacher pensions forced retirees to live 'barely' above poverty level

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A Michigan fiscal policy expert says that a public school employee and spouse would be “barely” above the poverty level if they had to live on the school employee’s annual pension.

Gary Olson, a former Senate Fiscal Agency Director and a senior policy fellow at Public Sector Consultants, was quoted as saying that in a Michigan Education Association article about Senate Bill 1040, which would require public school employees to contribute at least 5 percent of their compensation to their retirement plan.

Olson’s comments, however, deserve closer scrutiny.

The average pension for a public school employee is $21,000 annually, Olson said. He said he got that figure from the 2011 Michigan Public School Employees Retirement System annual financial report.

That annual MPSERS pension is still higher than the average U.S. government pension, according to a Congressional Research Service 2008 report. That study found people with government pensions had a median pension of $18,000 a year while private-sector median pensions were $7,584 a year. An $18,000 annual pension in 2008 would be $19,178 after it was adjusted for inflation in 2012.

The U.S. Department of Health and Human Services states that the poverty level for a household of two in 2012 is $15,130 in 2012.

A household of three would have a poverty level of $19,090, which would meet Olson’s standard of “barely” above poverty.

But that would mean that the household of three is only living off that single public school employee’s pension.

Olson’s quote also doesn’t factor in Social Security. If the public school employee and spouse were eligible for Social Security retirement, they each could make an extra $29,000 a year combined. According to the Social Security Administration, the average annual benefit for a retired worker in the U.S. in 2012 was $14,760.

That would mean that retired public school employee and spouse could have an annual retirement of $50,000-a-year relying just on the single school pension and each person’s Social Security pension.

To meet a poverty threshold of $50,770, a household would have to have 11 people.

When contacted by email, Olson said he didn’t make his comments about poverty during his testimony before the Senate hearing. When it was pointed out in a later email that the comments were in the MEA article, Olson didn’t respond.

Another fiscal policy expert says the MPSERS pensions are fair.

“The state offers decent pension benefits to members who have cost taxpayers billions,” said James Hohman, a fiscal policy analyst with the Mackinac Center for Public Policy. “Policymakers can be confident that the reforms they are considering will continue the state’s generosity, despite objections from current members.”

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