News Story

Michigan House budget proposal cuts payments on pension debt by $630M

Other legislation would allocate $3B to corporate handouts

The 2024-25 budget proposal from Michigan Democrats would scrap a $630 million payment meant to pay down liabilities in the school pension fund even as other legislation would provide $3 billion in corporate handouts. Deleting the pension allocation from the budget would cost Michigan taxpayers an additional $1.4 billion over time due to increased interest payments.

The Michigan Public School Employees Retirement System currently has $29.9 billion in underfunded pension liabilities. Gov. Gretchen Whitmer proposed removing $670 million from the state budget meant to pay down that debt. The budget, as proposed by the House, would remove $630 million, and the Senate’s budget would do the same.

While lawmakers contemplate this move, they are also considering legislation to allocate $3 billion in taxpayer funding to corporate welfare. House Bill 5768, introduced by Rep. Jason Hoskins, D-Southfield and 25 Democratic colleagues, would allocate $250 million annually in corporate income taxes to hand-picked business beneficiaries.

“There’s something odd about using a tax to take money from all businesses to hand it out to select businesses,” said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy. “Taxes are supposed to fund the government, not a favored few private companies.”

Diverting money from the pension plan would increase taxpayer obligations to beneficiaries by $1.4 billion, according to the Reason Foundation Pension Integrity Product.

The governor’s office did not respond to a request for comment.

“The Democrats’ proposal to raid the teacher pension fund is simply irresponsible,” Rep. Jaime Greene, R-Richmond, told Michigan Capitol Confidential. “Delaying the paydown of pension debt jeopardizes both teachers’ hard-earned retirements and the state’s financial stability. To protect retired educators, safeguard taxpayer resources, and support Michigan students, we must prioritize paying down this debt as quickly as possible — instead of robbing Peter to pay Paul.”

Public Act 92 of 2017 established a floor for state contributions to the retirement system, including contributions to make up for unfunded liabilities. It passed the Legislature with only Republican support and was signed into law by Republican Gov. Rick Snyder. In 2022, the voters of Michigan gave control of the governor’s office and the Legislature to Democrats.

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.