News Story

School Board Member: Close Teacher Pension System

System crowding out classroom funding

Ann Arbor Public Schools Board Vice President Christine Stead says it's time for schools to move away from the traditional defined benefit pension plan she says is taking money out of the classrooms.

Stead said she'd support a 401(k)-type of retirement benefit plan for school employees as long as it took into consideration that school employees were taking less in pay during their working careers for some type of secure pension in retirement.

Stead said there needs to be a different solution than the Michigan Public School Employees Retirement System (MPSERS).

"We are seeing MPSERS continues to erode our ability to fund the classroom," she said.

Ann Arbor Public Schools paid $17.8 million in pension costs and another $10.3 million in retirement health care costs and the state chipped in another $4.6 million for MPSERS costs in 2012-13.

MPSERS had a $24.3 billion unfunded liability as of Sept. 30, 2012.

State spending on education has become a campaign issue. The state has been increasing expenditures for K-12 education but an underfunded pension system has been eating up many of those dollars, squeezing districts and taxpayers.

"It's encouraging to see school officials recognize the risk that defined benefit pension plans pose to their budgets," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "Let's hope that they can organize around retirement features that provide benefits that are predictable, affordable and current."

Most other state workers in Michigan switched to defined contribution systems in the late 1990s after then-Gov. John Engler signed a bill making the switch. That has helped state taxpayers avoid more than $4.3 billion in unfunded liabilities since then.

Unfunded pension systems have been crowding out government services all over Michigan and the nation.


See also: 

Pension Costs Mean Tighter Budgets For Districts, Taxpayers

Retiree Benefits Pose Problems For Pothole Patching Plans In Grand Rapids

How Michigan Can Fix Its Pension Problems

Anatomy of How To Kill a Tax Hike

Pension Costs Mean Tighter Budgets For Classrooms, Taxpayers

Commentary: Shifting School Employees To a 401(k) Is the Most Important Thing

Teacher Pension System Hole Getting Deeper

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.