Opinion | Michigan spending more on education, but teacher pay stagnant

Eric Lupher is president of the Citizens Research Council of Michigan

Moving Michigan from the bottom of the states to the top in educational achievement will not be easy, but most would agree that quality teaching is an essential element of the effort. But the state could be stymied in attracting and retaining teachers due to a factor every working person understands: stagnant salaries. 

Many factors influence career choices, and clearly salary is an important one. And in Michigan, state administrators, staff and teachers must wrangle with the conundrum that even as new funding is pumped into education, it is not reflected in increasing teacher salaries. 

Why is this happening? Because of Lansing’s past failures to adequately manage and fund the state teacher retirement system. Consequently, much of that increase in education spending ends up going to Michigan’s former teachers, not the ones in the state’s classrooms. 

Like many other pension funds, the system suffered because of the sour stock market of a decade ago, along with unrealistic actuarial assumptions and short-term budget decisions. These failings have created ballooning unfunded liabilities that have to be met now and are diverting funding that might otherwise go to teacher pay.

Funding for retiree benefits

State revenue suffered in the first decade of this century, but has benefited from the growing economy since. However, it’s been far outpaced by the growth in unfunded retirement liabilities. In 2000, the teacher retirement system had $246 million of unfunded liabilities. By 2018, this had grown to $32.8 billion. Over the same period, pension funding grew from 11.7 percent of each school district’s payrolls to 32.3 percent with contributions from both school districts and the state.

Various reforms have been enacted to address and mitigate these legacy costs, but they can only slow the growth rate. 

The Snyder administration made funding legacy costs, and paying down other long-term debt, a priority and that appears to be carrying into the Whitmer administration. These actions are necessary but expensive. In a budget with limited resources, the payment of these liabilities leaves little room for increased spending elsewhere in school budgets.

This has created a unique dynamic wherein the state budget has been prioritizing education, but little of the increased funding is making its way to the classroom. 

The squeeze created by retirement costs not only affects the ability to fund priorities like early literacy and support of at-risk students, our research finds that in the end teachers are bearing the brunt of the pain.

Consider these numbers: Per-pupil education expenditures for operations increased 13 percent from $9,325 in 2008 to $10,548 in 2018, with most of the growth coming in the past five years. 

But at the same time, the statewide average teacher salary rose by just two percent, from $60,430 in 2008 to $62,530 in 2013. And it has remained close to that level since then. Some of this can be attributed to a minor changes in workforce composition (senior teachers leaving and younger, lower paid entering) but the bulk of the squeeze is tied to paying down unfunded liabilities.

To illustrate how changing spending is reflected in budget priorities, we calculated a ratio of average teacher salary to per-pupil expenditures. This ratio provides an understanding of teacher salaries in the context of the larger fiscal situation facing schools. It provides insight into the priority given to teacher salaries relative to other education spending.

Statewide, the ratio rose from 2008 to 2013, reflecting an increasing average teacher salary while per-pupil expenditures were fairly constant. Since, the ratio dropped sharply, reflecting increasing per-pupil expenditures while the average teacher salary has changed little.

Averages can be deceiving, but we found little variation when calculating this ratio at the district level, suggesting that the increased funding is not being reflected in rising average teacher salaries in most school districts.

Help wanted 

The beginning of a new school year is drawing attention to difficulties some school districts are having finding qualified teachers to staff the classrooms or substitute teachers to fill in when necessary. Our research released earlier this year documented problems throughout the teacher pipeline. Michigan’s teaching workforce has shrunk. Fewer high school graduates are enrolling in college intent on teaching as a career. Many of those that see college teacher prep through to completion leave for a different profession within the first five years of teaching. Even some tenured teachers are leaving for different professions.

Many things may account for the disinterest in teaching careers or the disillusionment with their nascent professional decisions, but salaries are surely part of it. 

Unless changes can be made to ensure the funding of retirement costs while providing adequate funding for other educational services, teachers will likely bear the burden with little to no increase in pay.

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Sun, 10/27/2019 - 3:34pm

Where does Michigan rank as compared to other states in teacher pay??? Adjusted for COL?
New teachers verse average teacher salaries? Is this recruitment problem limited to Michigan or is it a national trend? What are you looking for to solve these problems? You never bring these issues up and I'm sure CRC has ready access to this data, which must make one wonder what's the agenda here?

Sun, 10/27/2019 - 5:39pm

The average starting teacher salary in Michigan is around $36,000, veteran teachers average around $62,000. The starting salary is where the big problem comes in with someone graduating from college usually with loans to pay off and stuck in what seems to be a stagnant lower pay range. It is no surprise that people are turning away from teaching in Michigan if you can't advance up the pay scale in a decent manner.

Mon, 10/28/2019 - 12:52pm

You are right that starting pay is an issue, but it always was minimal compared to "real world" jobs. However it used to be a young teacher moved up the pay scale reasonably quickly, usually with step increases per contract of around 11 years making for pretty good annual pay increases . But to show how the MEA's priorities fall in solving this issue, in most districts the existing teachers have traded for no or fewer reductions in their existing and dumped the hits on the new hires and low seniority kids; most now have step increases requiring 20 years or more to get to the top of the pay scale and when combined with virtually no annual pay increases means they are barely keeping up with inflation. And of course the newbies don't get access to the better health care options, and there is alot of talk about the newbies no longer getting a defined benefit retirement and moving them to 401's. My own daughter always wanted to teach, started in 2012, was pink slipped then recalled for the first five years and then left taking home less money than she started with after health care and pension contribution increases. Thank goodness she was a math major and tripled her salary elsewhere.

middle of the mit
Mon, 10/28/2019 - 11:57pm

The same could be said of non State union workers. Of course, you could just ask the average worker.

But then again, ask the firefighters or police unions how their payscale has been effected. Then ask them why they didn't stand with the teachers even though the State wants teachers to do what cops do on a daily basis, Protect kids from possible gunfire. Yet, we need to get rid of bad teachers, but bad cops get a "break" when they "perceive" danger. This is not to put down cops. I just wish they would they stand up for their fellow citizens who are putting their lives on the line when needed.

Now imagine if you don't have a union.

When are we going to make all public workers "Right to work"?

Stand up! BE proud! Work for less pay and benefits while the shareholders take the profit!

Mon, 10/28/2019 - 9:56am

This problem is not unique to Michigan. We just had a trainer from Indiana in my district and she reported the same problems in Hoosier-land.

It is important that the author notes that the problem with the retirement system was created by poor planning at the state level. I've been around for awhile now so I can say that the state was told of the flaws in their processes time and time again.

I have also said over and over again, teacher pay is the main reason folks are not going into education. Lansing legislators have been told for years that this shortage was coming. I told my local legislator that this was coming back in 2011. Any legislator who acts like this is a surprise either hasn't been paying attention or is not being truthful.

College students are facing ridiculous levels of debt just to make it through college. They know this. Why would smart, capable students choose to go into a profession that will leave them with bills they cannot pay?

The most likely response to this is the old saw about teachers working only nine months out of the year. Here again, I have recommended that the state extend the school year and the required number of days for teachers and provide a per diem increase to districts. This would help the state address lagging student results as well as add to teacher pay. The dirty truth here is that such a suggestion flies into the teeth of the tourism lobby.

To summarize, there is a teacher supply crisis in this state. It shouldn't be a surprise to anyone. There are solutions, but they cost money and will make some groups unhappy. So long as we keep trying to solve a money problem with anything but money, we will continue to have a problem.

James Roberts
Mon, 10/28/2019 - 10:17am

The most significant part of this story is the inevitable impact on future pensions. Used to be; yes the pay is low but look at those great government benefits. However, there is a reason the private sector has almost eliminated defined benefit plan pensions. Just because Joe Taxpayer is there doesn't mean the sucking sound of demographics and actuarial realities can be defeated by tax increases on all of us. Does not matter what Constitutional requirements there are or probable lawsuits, the taxpayers will not allow for the necessary tax increases to fund the shortfalls and will vote in whoever gets them off the hook. I recommend any teachers plan accordingly for smaller pensions in the future.

Pat Curley
Mon, 10/28/2019 - 2:37pm

I agree, teacher pensions will be their downfall. I spent 35 years at an auto company and retired in 1994. My net pension today is $1733.00 a month; the same actual dollars I received in 1994, no COLA ever! As older teachers retire the pension fund will become stressed and eventually go bankrupt. Then, the federal pension guaranty fund will step in and give then a whole lot less per month.
A good example is a printer in Chelsea, MI. They were employee owned and in May 2019 filed for bankruptcy. The reason; older employees were retiring and the fund couldn't pay out. Bankruptcy was the only answer. God help the State of Michigan when that happens to the teachers retirement fund.

Disgruntled taxpayer
Mon, 10/28/2019 - 10:42am

The CRC seems to be completely missing the mark here. Why are the legacy costs so high? Largely due to the MEA's obstinance in retaining its MESA insurance program, which generally runs 20% to 50% higher than a comparable BCBS plan. It seems that whenever a district nears fiscal responsibility in offering its employees (and retirees) quality insurance for significantly less, the state-level MEA steps in to bully the local school board into acquiescing. You want to point the finger at why so much education funding misses the classroom? Point it at the teachers and other MEA members. The union is feeding its coffers at the expense of Michigan students.

Sun, 11/03/2019 - 5:40pm

In my district, MESSA was the most cost effective option when comparing the same benefits. It looks like you may be looking at old data.

Cathy Cherp
Mon, 10/28/2019 - 4:48pm

Why don't talk about the millions that the state has borrowed, out of our retirement bank ? You never mentioned the monies that have been borrowed but never returned. An unfunded retirement account would look much different. This needs to be acknowledged in every article. When this is left out, everyone jumps down the throats of every retired teacher they know

middle of the mit
Tue, 10/29/2019 - 12:04am

YOU need to show proof that the State is raiding your retirement fund. The only people raiding your retirement fund are the company you worked for, and the brokers you hired to manage it. The State can not go into your retirement fund. At all.

More conflagration, obfuscation and "alternative facts"!

I am tired of this! Can you not come up with something more plausible than that which is literally not plausible?

The only way this is literally plausible is IF YOU are or were a STATE employee and conservatives are going to take away your pension.

GET IT? If you didn't, You should now.

Karen Rykhus
Sun, 11/03/2019 - 6:22pm

So true. The legislature continues to give tax breaks to business at the expense of schools and other services for taxpayers. Right now Michigan is 50th in increase to education since 1995 and one of two states that has increased less than cost of living money during the same time. Shameful!!

Ed Haynor
Tue, 10/29/2019 - 1:52pm

It would seem that this statement by author Eric Lupher is quite profound, “In 2000, the teacher retirement system had $246 million of unfunded liabilities. By 2018, this had grown to $32.8 billion. Over the same period, pension funding grew from 11.7 percent of each school district’s payrolls to 32.3 percent with contributions from both school districts and the state.” If this isn’t complete mismanagement by the legislature and former governors, I can’t imagine what is, can you?

It continues to amaze me, how those in Lansing consider themselves to be experts on all subject-matter under the sun, when in reality, most aren’t experts at anything, particularly matters of finance. So, there should be no doubt why Michigan’s infrastructure and school funding are in such terrible shape.