Michigan Now Spending More on Teacher Retiree Liabilities Than Prisons
Pension costs are crowding out other state funding
The state of Michigan will spend more money in 2015 on trying to catch up on underfunding for the public school employees pension liabilities and retirement health care than it will spend on the Michigan Department of Corrections.
Michigan is planning on spending $1.937 billion to catch up on underfunding for the Michigan Public School Employees Retirement System and another $880 million to catch up on public school employee retiree health care costs.
The state’s 2015 budget for corrections is $2.040 billion.
In 2013, the state underfunded its annual costs for pension and retiree health care for public school employees. The state only paid 70 percent of the anticipated costs for pensions that year and 66 percent of the anticipated costs for retiree health care.
The MPSERS’ pension has $25.8 billion in unfunded liabilities. Retiree health insurance benefits are also provided by the system and the value of benefits under current policies amounts to an estimated $13.4 billion exposure.
“Catching up on pension underfunding is a serious problem that’s crowding out other priorities,” said James Hohman, assistant director of fiscal policy for the Mackinac Center for Public Policy. “The state should offer defined-contribution retirement plans in order to contain this problem.”
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.