The Debate Over School Spending

Teacher pension costs really are part of classroom spending

MIRS news service in Lansing reported recently on a difference of interpretation in school spending between the Mackinac Center for Public Policy and an Oakland County school district official. 

West Bloomfield Superintendent Gerald Hill fought back today against a Capitol Confidential article that accused him of spreading misinformation in MIRS.

In the article, Mackinac Center Education Policy Director Audrey Spalding was quoted as saying, "The West Bloomfield superintendent is repeating the same misinformation that we have seen from the MEA and other school officials. By only considering the foundation allowance, he is ignoring nearly $1,200 per student in funding from state taxpayers."

Hill in a subsequent analysis noted, "We do receive less money per student in the foundation allowance, which is the funding source we use to operate classrooms. This is not misinformation it is actually the case."

He notes that in 2009-10 the district received $9,116 in foundation allowance and in 2013-14 it received $8,676, a fact the Mackinac Center in its article agreed with.

So how does the Mackinac Center get to a $515 increase? By rolling in categoricals like the Michigan Employee Retirement System, or MPSERS. But Hill provided numbers showing that while the state's MPSERS money offset increases, the increase in retirement expense on a per-pupil basis exceeded the increase in funding from the state.

The root of the discrepancy? The foundation allowance versus what the Gov. Rick Snyder administration now refers to as per-pupil funding. It's a one-district example of an ongoing debate in Lansing about whether funding has increased or decreased.

The "misinformation" is the superintendent saying the district is getting "less money" while it actually is receiving $515 per pupil more. There is not an "ongoing debate in Lansing about whether funding has increased or decreased." Funding has indisputably increased. There is a debate over whether to count all K-12 spending as spending. Or, more specifically, whether the public school establishment counts teacher funding as "classroom funding."

This issue is actually a case study in why the state should shift teachers off of the current defined benefit pension system and toward a 401(k)-type plan like it has with other state employees. Here's why:

Michigan's teacher pension system has billions in unfunded liabilities. The problem got so bad a few years ago, that districts were projected to spend nearly 40 percent of their employee salary costs on the system — mostly to make up for past underfunding. There was a reform a few years ago that severely reduced that cost and began shifting more state money to make up for past liabilities and to ensure that public employees got their pensions.

So what has happened since? Administrators and unions ignore that reform and the extra spending on teacher pensions and continue with the drumbeat that they should receive even more money — a line they repeat every year, no matter how much taxpayers spend.

This being the case, it becomes obvious why having a pension system is so dangerous. Those benefiting from government programs constantly call for money to be taken from the pension system and fund what they like. That's why schools and unions were rarely heard from when MPSERS was racking up liabilities, but now when that money is shifting to ensure the system is funded, there is constant coverage of complaints

It is easier for politicians to spend money now than sock it away for decades in the future when school employees are retiring. In other words, politicians have an incentive to underfund the pension system — and that's what they do.