News Story

Michigan House scheduled to vote June 20 on diverting $670M from teacher debt to other projects

Teacher pension retirement system nearly $30B in debt

A proposal to reallocate $630 million meant to pay down teacher pension debt to other priorities is on the June 20 House agenda. It is House Bill 5803, sponsored by Rep. Matt Koleszar, D-Plymouth.

A successful petition to move the bill to the House floor would lead to a vote to reallocate the money that had been scheduled to help pay down $29.9 billion in debt to teachers and others in the Michigan Public Schools Employee Retirement System. The bill would still need the Senate’s approval and Gov. Gretchen Whitmer’s signature.

The change envisioned by the bill would reduce pension fund contributions and increase costs for taxpayers by another $1.4 billion, according to the Reason Foundation.

The pension fund is one of the largest obligations taxpayers face, said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy. “The state accidentally made school employees the state’s largest creditors by promising pension benefits and not setting aside enough money to pay for them,” he told CapCon.

Koleszar did not respond to an email seeking comment. House Democrats also did not respond to a request for comment.

Two Republican representatives previously told the governor they oppose the plan. Reps. David Martin, R-Davison, and John Roth, R-Interlochen, sent a letter to Gov. Gretchen Whitmer which said in part that annual debt paydown payments ”must remain in the teachers’ retirement system ... to pay down the state’s unfunded obligations.”

Rep. Nancy DeBoer, R-Holland is vice chair of the House School Aid Appropriations Subcommittee. She also opposes the move. ”Diverting money from the teacher retirement system in past state budgets created this massive funding hole,” DeBoer told CapCon in an email. “It’s hard to imagine that diverting more money, again, is financially responsible. Overall, the teacher pension retirement system still owes the school employees over 30 billion dollars more. Paying this debt off would free up billions for classrooms and benefit current and retired school employees."

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.