News Story

Public School Administrators Complain About Pension Costs; Don't Offer Solutions

School superintendents across the state are starting to take their message about rising teacher retirement costs directly to parents.

Midland Public Schools Superintendent Michael Sharrow wrote June 16 that retirement costs were costing the district an extra $60 per student.

Farmington Public Schools Superintendent Susan Zurvalec also told parents in a letter the district's budget woes were tied to costs related to the Michigan Public School Employees Retirement System.

Teachers across the state still get traditional pensions as retirement benefits. Other state workers and most people employed in the private sector have 401(k)-type retirement plans. The unfunded liability for teacher pension benefits increased to $25.8 billion in 2013, up $1.5 billion from 2012. 

Zurvalec wrote: "In fact, with the rising cost of the retirement system, which is not under our control, we are actually losing approximately $25 per pupil and not receiving any increase overall." 

But James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, said school district officials could do more about MPSERS.

"They are absolving themselves of responsibility when they should be the primary voice of reform," Hohman said. "They are the ones who have to pay for school underfunding. While funding ultimately comes from taxpayers, district officials are scraping the bottom of the peanut jar to pay for MPSERS. Instead of doing that, they should be on the record supporting MPSERS reforms."

In 2012, Michigan legislators enacted some reforms to deal with MPSERS’ unfunded liability. For example, employee contributions to the plan were increased, some benefits were limited and new employees were given the option of joining a 401(k)-type plan. Spokesmen for the GOP as well as Gov. Rick Snyder say those reforms are working.

Hohman says closing MPSERS to new employees, similar to what happened to the state of Michigan employees retirement plan is needed. The Michigan State Employees Retirement System (MSERS) was closed to new state employees in 1997. Today, the state offers state employees 401(k)-type plans. Moving state of Michigan employees out of the previous plan has saved taxpayers an estimated $2.3 billion to $4.3 billion.

Sharrow said in an email he wasn't sure where he stood on the issue of MPSERS.

"One of the issues compounding the system is how many present employees are investing dollars into the system," he said. "An easy fix would be to include charter school employees in the system. Changes need to be made and they need to be made for the right reasons and careful thought."

Zurvalec did not respond to requests for comment.

(Correction: The headline on the story has been changed. It previously said superintendents "never" offer solutions. Also, Midland Superintendent Sharrow responded to our request for comment after deadline. His comments have been added above.)

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.