News Story

School Pensions Sucking Up Per Pupil Cash

Michigan government's two largest pension systems offer public sector employees benefits that are out of line with those in Michigan's private sector and are not likely to be affordable long-term, according to a new study published by the Mackinac Center for Public Policy.

The state's two biggest public sector pensions are the Michigan Public School Employees' Retirement System (MPSERS) and the Michigan State Employees' Retirement System. The study's author was Rick Dreyfuss, a Mackinac Center Adjunct Scholar.

The study found that most private sector companies provide pension benefits only through a 401(k) plan or some other type of "defined contribution" plan.  But MPSERS is a "defined benefit" plan where a retiree gets a predetermined monthly retirement payment typically based on years of service and a multiplier.

The school districts are facing a 6.4 increase to 20.66 percent in payments they make for pension and retirement health care benefits. That increase took effect Oct. 1. That means for every $1 the school districts pay an employee, the district has to kick in 20.66 cents to MPSERS.

The MEA has filed a lawsuit over its employees having to pay an additional 3 percent contribution to MPSERS.

James Hohman, fiscaly policy analyst at the Mackinac Center for Public Policy, said the MEA lawsuit means that schools have to set aside an additional $187  per pupil for teachers' benefits.

"The MEA's lawsuit effectively sends the message that schools don't need an additional $187 per pupil," wrote Michael Van Beek, the Mackinac Center's education policy direction, in an email. "This is a clear instance of the interests of school employees and their unions trumping the interests of parents, students and, ultimately, taxpayers."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.