News Story

MEA Union President In Line for Six-Figure Government Pension

Despite just 15 years in the classroom, special deal may net Steve Cook $105,000 a year

When the current president of the state's largest teachers union worked for the Lansing School District more than 20 year ago, his job title was “paraprofessional.” That's a position that pays between $7.69 and $16.52 an hour, according to a recent union contract.

But thanks to a special deal approved by the Lansing district in 1993 and allowed by a state law, Michigan Education Association President Steve Cook could retire and collect a government pension of up to $105,000 a year. That pension would come from the underfunded school employee retirement system, which is run by the state. That's because Cook has been allowed to use his $200,000 union salary as the basis on which his school pension will be calculated, rather than the much smaller salary he earned back when he actually worked in a classroom.

In effect, a state law that has since been amended allows Cook to accrue years of service credits in a government pension system even though his real full-time job is with a private union.

According to the Lansing School District, the agreement gives Cook the option to renew the deal every three years, while the school district has no ability to get out of the arrangement.

If Cook’s retirement benefits were based solely on the years he spent working as a school paraprofessional, it is estimated that his annual pension would be $7,731. In other words, the deal will allow Cook to collect about $97,000 more each year than he would receive on the basis of his relatively brief classroom career. (While Cook's paraprofessional pension would be higher if he had remained in the classroom for more years, it would still be a fraction of his current expected payout.)

The estimates of the union president's pension are based on an assumption that the Lansing School District has kept Cook on its payroll ever since he became a full-time union official in 1991. The school district confirmed that on Thursday. The MEA has refused to reveal specific details.

A Freedom of Information Act submitted to the district by Michigan Capitol Confidential is pending.

The Lansing School District says it was reimbursed by the union for all of the payroll expenses it incurred on Cook's behalf, including the district's pension contributions. However, the reimbursement would not include additional pension fund contributions that are made by the state.

Cook is listed by the district as an “educator on loan” to the MEA. Some of the specifics of Cook’s deal are still unclear. It is believed that it also grants him lifetime health insurance coverage as a member of the Michigan Public School Employees’ Retirement System (MPSERS).

“If an employee qualifies for a pension they generally qualify for health coverage as well,” said Caleb Buhs, a spokesman for the Office of Retirement Services.

Buhs confirmed that Cook’s pension under the arrangement would be based on his $200,000-plus MEA salary and not the much smaller salary Cook earned as a paraprofessional.

The Michigan Education Association has not responded to any emails asking about the arrangement.

The deal was legal under the Public School Employees Retirement Act of 1979. School employees who went on a “professional services leave” before Oct. 1, 1996 were allowed to use their time on the job with a professional service organization to rack up more “service credits” with the school retirement system, and also use their salary with the private employer as the basis on which their school pension benefits are calculated.

The Office of Retirement Services is investigating how many people became eligible for deals similar to Cook’s by taking leave before the October 1, 1996 deadline. Its preliminary findings suggest between two and 14 individuals are eligible for similar deals.

“This sweetheart deal reminds me of the Wall Street execs who took huge bonuses in 2008 and 2009 while simultaneously destroying their investors’ wealth and taking government bailouts,” said Joe Lehman, president of the Mackinac Center for Public Policy, in an email. “In this case, it’s the teachers’ pensions that are being threatened and the government bailout grows more likely with every abuse like this one. This may be legal, like those Wall Street bonuses, but that doesn’t make it right.”

Cook’s deal to remain eligible for a public pension while working full time for a non-public employer comes at a time when the MEA's own pension fund is facing millions of dollars in unfunded liabilities for retirement benefits accrued by its employees.

According to a LM-2 report the union is required to file, in 2014 it had a $77.1 million liability for retirement benefits and another $112.2 million liability for retiree health care benefits.

To help cover those costs, the MEA started charging unionized school employees an extra $50 a year in 2013, a charge that is supposed to end in 2016.

It's unclear if Cook will also be getting a pension from the MEA in addition to his government pension.

The estimate of what Cook's school pension would be without the special deal is based on a union contract in effect from 2004 to 2007. The salary range for an employee with the same classification as Cook ranged from $7.69 an hour to as high as $16.52 an hour. Cook’s annual salary would have been $34,361 if he had worked 40 hours a week at the highest hourly rate of $16.52.

Cook’s biography on the MEA’s website says he worked 15 years as a paraprofessional with the Lansing School District.

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.