News Story

State Pension Underfunding Enough To Give Pontiac Teachers $11,000 Bonuses

There are no bonuses; that's how much more district paid pension fund in 2020 vs. 2010

Pontiac’s public school system was one of 17 districts in the state that was in deficit in 2019-20, meaning it spent more than it took in.

Like every public school system in Michigan, the Pontiac district has been hurt by having to contribute increasing amounts each year to the state-run school pension system.

The district went from having to contribute $3.96 million in 2010 to having to contribute $6.75 million in 2020.

That extra $2.79 million in 2020 was a 70% increase over 10 years. How much is that?

The school district has 255 full-time teaching positions. The $2.79 million extra it has to pay for pensions in 2020, compared to a decade ago, would allow for about an $11,000 bonus for every teacher.

School district budgets are suffering under this burden because, for years, the state has neglected to fully fund its pension obligations.

The Michigan Public Schools Employee Retirement System has, for most of the past 19 years, underfunded the amount its accountants calculate is needed.

That amount, called the required annual contribution, has grown from $669 million in 2002 to $2.8 billion in 2020.

But according to the MPSERS annual financial reports, the state has adequately funded the system in just four out of 19 years. Those surplus ranged from 1.1% to 113% in 2013, which are small amounts compared to the magnitude of the underfunding. And in 15 of those 19 years, annual contributions to the pension fund were below the required amount.

The state of Michigan states that the underfunding of MPSERS is “the result of a timing difference between when the actuarial valuation is completed and the contributions are made.”

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.