Michigan Spends More on Teacher Benefits Than Most Other States

Of all the funds spent on “instruction” in Michigan public schools in 2008, 28 percent went to employee fringe benefits. Only five states devoted more of their resources to benefits; the national average was 22 percent.

The data comes from the National Center for Education Statistics, which breaks down the percentage of instructional costs that went to salaries, benefits, purchased services and supplies. Michigan spent only 61.5 percent on salaries, the third lowest after New Jersey and Alaska. Texas, North Carolina and Indiana led the nation by devoting about 75 percent of instructional costs to salaries.

Holding down the proportion spent on fringe benefits helps schools budget by making it easier to contain costs when funding is tight, because compared to benefits schools have more direct control over how much they’ll allow salaries to grow.

In fact, Michigan school districts have virtually no control over how much they pay for employee retirement benefits. These are mandated by the Legislature. In addition, most districts have voluntarily given up control over their health insurance costs to the MEA school employee union: Its subsidiary, the Michigan Education Special Services Association, is the company used by 440 of 551 school districts, and it requires districts to forfeit their right to be the policyholder of their own plans. Instead, MESSA holds and administers the policies, giving it control over year-to-year costs.

Locking in high labor costs by devoting such large amounts to employee fringe benefits is taking a toll on Michigan schools — and on taxpayers. The percentage of payroll that school districts must contribute to employee pensions has almost doubled over the last decade. When adjusted for inflation, the amount that schools spent per pupil on employee health insurance has increased by 56 percent over the same period.

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.