News Story

Schauer Calls For Long-Term Solvency Of Pension System; As State Senator Voted To Underfund It

Bill from 2007 specifically took from employee retirement system


Gubernatorial candidate Mark Schauer says one of his plans if he is elected is to ensure the long-term solvency of the Michigan Public School Employees Retirement System (MPSERS).

However, as a state senator in 2007, Schauer voted along with most other legislators specifically to underfund that system. House Bill 4766 balanced the budget by reducing the pension fund contribution — which is one of the reasons MPSERS today has an estimated unfunded liability of $24.3 billion.

MPSERS contribution rate per year.

Schauer’s education plan would also require all charter public school employees to participate in MPSERS. The expanding unfunded liabilities on membership, however, show that adding more people into the system would likely increase underfunding gaps.

Schauer’s campaign did not respond to a request for comment.

Adding more employees to spread the increasing cost of MPSERS is not the solution, says Michigan Association of Public School Academies President Dan Quisenberry.

“The MSPERS system is broken,” Quisenberry said. “It’s draining precious resources from all classrooms ... The system needs further reform to make it healthy, and even adding in every person teaching in a charter school would not make the system stable.”

Quisenberry pointed out that many of the people who work in public schools, charter and conventional, are actually employed by private companies, and are not a part of MPSERS.

Gary Naeyaert, executive director of the Great Lakes Education Project, notes that there are only about 4,000 charter school teachers who are not part of the fund, accounting for less than 2 percent of the system's membership. There were 223,769 active members in MPSERS as of Sept. 30, 2012 (the most recent available).

Pushed by Gov. Snyder, the Legislature made complex reforms in 2012 that had employees make greater contributions and allowed new hires to choose a 401(k)-type plan in lieu of the traditional annual pension. That lowered the MPSERS unfunded liability by $561 million in 2013.

Still, the system costs roughly 30 cents on every dollar school districts pay out in salary to fund. The past underfunding has cost taxpayers much more and tightened the budgets for districts.

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, said the long-term solution is to close MPSERS and have the school employees on a 401(k)-type plan like other state employees and workers in the private sector.


See also:

Pension Costs Mean Tighter Budgets For Classrooms, Taxpayers

Commentary: Shifting School Employees To a 401(k) Is the Most Important Thing

Teacher Pension System Hole Getting Deeper

Schauer Education Plan Looks To Shut Down Successful Charter Public Schools