News Story

Hefty School Employee Pensions Burden State Taxpayers

At 57, retiree would get $94K a year increasing to $204K a year over time

When Flint Community Schools Superintendent Linda Thompson made news that she was going to retire, what was missed was the fiscal impact of her leaving the school system.

Thompson worked 36 years for the Flint school district and will be 57 when she retires. A public school employee who worked 36 years for Flint schools and made Thompson's average salary of $175,649 the past three years would earn a pension of $94,850 a year.

If that 57-year-old retiree received a pension for the 26 years of his or her life expectancy with a 3 percent cost of living annual increase, it would grow to $204,552 a year.

"They are getting lavish benefits from an underfunded pension system,” said James Hohman, a fiscal policy analyst with the Mackinac Center for Public Policy. "But the terms are the terms. The problem with the pension system is the politicians don’t put enough money aside for it. It's not her fault that politicians can't be trusted to manage a pension."

Thompson's benefits are part of the guarantees written into the contracts she worked under in her time in the district. The generous terms highlight the need for serious reform of the taxpayer-funded teacher pensions systems.

The Michigan Public School Employees' Retirement System’s unfunded liability has reached $22.4 billion. One reason is the state tacks on a 3-percent annual cost of living adjustment to many of the pensions of public school retirees.

The state law was changed in 2010 so that public school employees hired from July 1, 2010 and after do not get the 3 percent cost of living adjustment.

A 2010 study done by the Mackinac Center for Public Policy found that only 6 of 24 major private companies in Michigan had a defined benefit pension plan similar to what teachers are offered. And none of the 24 private companies offered cost-of-living increases.  

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.