Commentary: Legislators Choose School Employees Over Taxpayers on Retirement Benefit Reform

Imagine that a politician asked you to lend him some money, for which he would give you an IOU with a footnote allowing him to unilaterally cancel or reduce the debt at any time.

If you lent the money anyway, you could hardly claim to be surprised if the politician exercises his option to drop the payment.

This example roughly describes the situation public school employees find themselves in regarding politicians’ promises of post-retirement health benefits.

Michigan’s arrangements in this area are unique. Unlike regular pension checks, nothing in law obligates taxpayers to honor these retiree health benefit promises. The politicians never set aside any money to pre-fund them, and implicitly reserved the right to trim or even eliminate them should the cost become unaffordable. Considering that benefit costs increased by $366 million since 2000, an 85 percent jump, these costs are prohibitive.

Given the growing burden these optional benefits place on taxpayers, plus the fact that few in the private sector receive such benefits (and that everyone is entitled to federal Medicare coverage at age 65) — it’s good news that reform legislation is now being debated in Lansing. Among other things, the bill would eliminate those “politicians’ promises” of retirement health benefits for new school employees, and require current retirees to share more of the cost.

Unfortunately, the school establishment empire has struck back. Almost every day brings new reports of proposed reforms being weakened or gutted. For example, one removed provision would have provided the benefits only when a retiree reaches age 60. This is hardly radical: Why should anyone collect an optional, taxpayer-funded retirement benefit in their 50s?

By giving in, lawmakers are placing school employees and their unions first, and taxpayers second. This despite the fact that Michigan can no longer afford to give a protected class of school and government employees benefits far richer than what their private sector neighbors get.

Legislators should start remembering who deserves their primary loyalty.

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.