Teacher retirement fund has $45 billion hole

When something once vital and secure dies, it must be mourned. And so David Campbell, superintendent of the Livingston Educational Service Agency in Howell, likes using the language of a funeral director when discussing Michigan’s retirement program for school employees.

“We’re in the middle of a grieving process,” he said recently, going through stacks of white papers and other documents detailing the sad state of this state’s, and other states’, public-employee pension funds, a topic he’s studied with the dedication of a born policy nerd. “And we have to go through the stages -- anger, denial, bargaining, depression ...”

The last stage is “acceptance” -- and all acknowledge we’re still pretty far from that.

Here’s what is acknowledged: The Michigan Public School Employees Retirement System is underfunded to the tune of $45 billion.

Funding pensions is basically math, calculating such factors as money going in and out, number of people in the system, the performance of the fund’s assets in financial markets, as well as how long pensioners are expected to live. Much of the cost is borne by the state’s public school districts, which, under Proposal A, are the system’s major funders, paying a bill determined and submitted from Lansing. Ten years ago, they paid around 12 percent of their payroll costs to support the retiree system. This year, the rate is 24.46 percent -- and it’s projected to rise to above 27 percent next year and 31 percent the year after that.

And with each increase, the retiree costs eat into the state’s per-pupil foundation grant to districts, forcing difficult decisions at a time when schools are under pressure to raise students' test scores and college prospects.

It goes on: As the state’s enrollment has declined, fewer teachers are employed, which means fewer paying into the fund, a problem compounded by years of cost-trimming through privatizing and outsourcing school services, which have also cut employee contributions. Incentive programs have encouraged the oldest, best-paid teachers to retire, in part to ease districts’ payroll costs, infusing the system with even more people claiming benefits. (Today, 236,660 active employees pay into the system, while 192,435 draw out of it, on trend lines that have been steadily creeping toward one another for a decade.) The system’s investment portfolio has suffered along with millions of others, and health-care costs for retirees are doing what health-care costs always do -- rising.

It adds up to a perfect storm of stress and recrimination, and a bill introduced in the Michigan Senate to address it hasn’t helped. A hearing April 11 featured teachers complaining that system reform would upend years of planning and might not even fix its problems.

Senate Bill 1040 doesn't fix the problem, it moves a bunch of costs to our side of the ledger and kicks the can down the road,” complained John Olekszyk, a retired teacher from Roseville who spoke on behalf of the Coalition for a Secure Retirement. Health-care costs will continue to rise, he said, while retirees and others counting on the system see the rules change, again and again.

Campbell points out that problems of MPSERS are hardly unique -- or unanticipated.

In 2010, the Pew Center on the States published “The Trillion Dollar Gap,” a report blaming the nation’s policy-makers for “failing to make annual payments for pension systems at the levels recommended by their own actuaries; expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and providing retiree health care without adequately funding it.”

All the way back in 2004, the Citizens Research Council of Michigan published its own report on MPSERS in the wake of the early-decade stock-market downturn, neatly outlining all of today’s problems. “The outlook for MPSERS contributions and the effect on school district budgets is decidedly gloomy,” the report concluded. And that was before the financial crises of 2008.

Of the $45 billion in unfunded liability, the state estimates about $17 billion comes from the pension side of the benefit package. Such pensions are constitutionally protected. The rest comes from health care, which is not funded actuarially, i.e., pre-funded according to statistics and estimates of demand, but on a pay-as-you-go basis, a decision made in the 1990s during the administration of Gov. John Engler.

“School districts are not to blame for this situation,” said Rep. Rick Olson, a Saline Republican who served on the Republican legislative working group that analyzed the problem this year. “This problem has really been caused by state policies in the past.”

Or, as Campbell puts it, “They wrote checks they couldn’t cash.”

Now that the checks are arriving, Senate Bill 1040 requires participants at all levels of the MPSERS system to pay more. The proposed changes led to teachers, in the April 11 hearing, telling legislators that reforming the system now will force them to scrap plans to retire at an age when most private-sector workers are settling in for another decade or more of employment. One teacher said her intent to retire at 47 will have to be put off until 60; another said reform would “fundamentally alter our plans, our hopes and our dreams” to retire at 54, according to reports in the Detroit News and Gongwer News Service.

Olekszyk says teachers are only playing by rules set up by the state.

“We didn't make the rules,” he said. “They dumped 17,000 more retirees into the system (in 2010, a move designed to save districts money). I don't think they thought about the unintended consequences. Why do we have to pay for that?”

Michigan’s specific rules of retirement eligibility exacerbate the problem. Employees need only 25 years of service to retire with a full pension, if they choose to buy another five years’ worth according to a formula based on salary.

(That’s less likely now than in the past. A law passed in 2008 requires teachers to have two years of employment before they can start buying service years.)

“These things need to be pointed out,” said Campbell, “to help us with our grieving process. This system was built for a different economy. Now it’s a global economy. It used to be affordable. Now it’s not.”

The Office of Retirement Services estimates SB 1040's fiscal impact thusly: The cumulative first-year pension savings would be $260 million and cumulative first-year health savings would be $120 million, with long-term pension liability reduced by $1.6 billion and long-term health liability reduced by $6 billion, for an estimated total reduction in unfunded liability of $7.6 billion (out of the $45 billion total).

Michael Moloney, an aide to Sen. Mark Jansen, co-sponsor of the bill, said the savings would accumulate over time. The reforms would “mitigate the growth curve,” for a “draining the swamp solution” to the problem, he said. Deborah Drick, Jansen’s chief of staff, said the extra funding will sustain the system as its oldest members leave it over the next few decades, eventually leading to equilibrium. Employees hired after June 1, 2012, would receive deposits to a health savings account for use in buying health insurance in their retirement.

“To people who say this kicks the can down the road, I’d say that if we do nothing, we’d be bankrupt in 10 years,” Drick said. “That is kicking the can down the road.”

Staff Writer Nancy Nall Derringer has been a writer, editor and teacher in Metro Detroit for seven years, and was a co-founder and editor of GrossePointeToday.com, an early experiment in hyperlocal journalism. Before that, she worked for 20 years in Fort Wayne, Indiana, where she won numerous state and national awards for her work as a columnist for The News-Sentinel.

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Tue, 04/24/2012 - 8:58am
Do like the auto companies did. Eliminate retiree health care. For the UAW employees, the UAW is now responsible for retiree health care. For the salaried employees, the auto companies said "good bye". There is Medicare once one is 65, and the companies give a yearly stipend which has no cost of living increases to spend as the employee sees fit. A few years ago, the stipend covered the cost of supplemental insurance, but now it is just a little under the cost. As insurance costs rise in future years, the stipend, if it still exists, will cover less of a percentage of the cost of insurance. As employees, we know this, we don't like it, but we accept it. It is necessary to preserve the health of the company. The school districts also did wrong by letting their employees buy extra years. Putting money into the system as one nears retirement is not the same as putting it into the system in the early years of employment. Part of the problem is that weak school boards with little knowledge of actuarial facts negotiate the contracts, and of course the teacher's union will take all they can get. Losing benefits is a hard bullet to bite. The UAW and auto companies negotiated this to something that is sustainable. The school boards, state, and teachers unions should do the same.
Wed, 04/25/2012 - 11:17am
Two issues of fact: First, retirement benefits and terms are not negotiated at any level, local or state. They are under the sole control of the state Legislature. Given that the Republican party, not normally a close friend of unions, has had control of the state Senate since 1983 and control of both houses for most of that time, I don't see how anyone can lay this solely at the feet of unions - and certainly not school boards. Second, it seems to me that the VEBA used to take over retirement benefits for UAW members was funded in part with stock contributed by the auto companies. That's a lot easier than contributing cash, but the State of Michigan doesn't have that option.
Tue, 04/24/2012 - 9:16am
Rich, you are on to something. Since we can't eliminate the teacher's pension program without a Constitutional amendment (not going to happen), we have to look at other methods to keep this solvent AND help the school districts financially. Why should teachers get to retire so early? I know they work hard, but their job is not physically taxing and they get summers off. They should be able to retire whenever they want, but should have to be at least 65 before they can collect their pension. Every additional year they work is worth two, one for paying into the system, ane one for not collecting a pension. I'm willing to pay more taxes to fund my children's education, but not to fund their teacher's retirement.
Tue, 04/24/2012 - 10:06am
My biases: I'm not a teacher. My wife is a 49 year old teacher - we have two in college and one in high school. Teachers shouldn't be able to retire so early - and now my wife (whose plan was to work much longer than 25 years) will have to work even longer to support the sweetheart deals of the folks who, by mere chance, were fortunate enough to have been born 10-20 years earlier and got out when the system was flush. That's not really a fair system. But it seems increasingly common, in all things, that the young and the middle aged are supporting an economic system that allows seniors to hold on to excessive amounts of wealth to the bitter end while young families struggle. My generation will muddle through. My two oldest kids, who both aspire to be teachers like their mom, will enter the work force at the worst point in the last 80 years and, beyond their student loan debt, they'll bear the added burden of supporting benefits for many people who didn't even have to work to age 50 to "Earn" them. Yes teachers bust their butts for kids AND they get summers off. Being a teacher is more physically taxing than being a Wall St. banker and look what they're allowed to make. My wife brings home 1-2 hours of additional work every work day of the year. Consider this analysis regarding teacher pay - by an anonymous author. Teachers’ hefty salaries are driving up taxes, and they only work 9 or 10 months a year. It’s time we put things in perspective and pay them for what they do – babysit. We can get that for less than minimum wage. That’s right. Let’s give them $3 an hour and only the hours they worked; not any of that silly planning time, or any time they spend before or after school. That would be $19.50 a day (7:45 to 3:00 PM with 45 min. off for lunch and plan– that equals 6 1/2 hours). Each parent should pay $19.50 a day for these teachers to baby-sit their children. Now how many students do they teach in a day…maybe 30? So that’s $19.50 x 30 = $585.00 a day. However, remember they only work 180 days a year. I am not going to pay them for any vacations. LET’S SEE…That’s $585 X 180= $105,300 per year. (Hold on. My calculator needs new batteries.) What about those special education teachers and the ones with master’s degrees? Well, we could pay them minimum wage ($7.75), and just to be fair, round it off to $8.00 an hour. That would be $8 X 6 1/2 hours X 30 children X 180 days = $280,800 per year. Wait a minute — there’s something wrong here. There sure is. The average teacher’s salary (nationwide) is $50,000. $50,000/180 days = $277.77/per day/30 students=$9.25/6.5 hours = $1.42 per hour per student– a very inexpensive baby-sitter and they even EDUCATE your kids!) WHAT A DEAL!
Thu, 04/26/2012 - 12:36pm
I have heard that analogy at public meetings by teachers. Everyone I know brings home a lot of work at night if they are professionals- in summer it slows down to 45-50 hrs a week. It would be nice as a professional(with 2 advanced degrees- my wife has one)to have confidence in our future employment and pension/benefits. I am worried sick about my job in IT- and my wife has been unemployed for a year. At age 56 and 54 we feel vulnerable(my wife more than vulnerable) yet our acquaintences who are teachers dont seem to have a worry in the world. If only I (and others I know ) had it over- and we dont work in Wall St as does 99.99 % of the rest of the population(a famous teacher straw man). YOu are lucky though to have a solid second income and pension..and if a family an adult home when school is closed.
Fri, 10/10/2014 - 7:01am
Chris... While you are calculating and deflecting facts, let's discuss the HOURLY RATE teachers receive. $50,000 a year for a teachers salary on 1400 hours (avg MEA contract hours) is $35.71 an hour...not too shabby. NOW...take that $35.71 an hour and times that by a normal work year....2000 hours...that non-teachers have to work is (2080 hours minus a paltry 2 weeks vacation) , you have a salary of .... $71,428 a year is what a $50,000 teacher makes if equating that job to the corporate world. So next time you spin facts, why dont you mention the HOURLY RATE teachers get?
Sat, 05/09/2015 - 10:39am
Bob, I think you should take that average salary and divide it by how many hours a teacher actually works not the minimum required in the contract. You'll see a vastly smaller hourly rate.
Tue, 08/14/2012 - 3:50pm
What people don't seem to realize is that the formula used for determining pensions is based on years of service and final average salary. The longer a school employee works, the larger his or her pension. By retiring at 56 with 35 years of service, my pension is considerably less than if I had continued to work to 65 as some suggest. The issue of buying years is a red herring. Few school employees can afford to buy years at actuarially determined rates. Finally, the unions have nothing whatsoever to do with the pension system; it's a state controlled system, so quit blaming the MEA and AFT for its problems.
Tue, 08/28/2012 - 1:36pm
You are generalizing; I work for a community college. I am NOT a teacher and I do NOT get summers off. It has taken me 15 years of work here to get back up to the salary level that I had before being "downsized" from a corporation. I'm nearing retirement age and every penny is valuable. My youngest is now in college and this is my only source of income. I've already been exposed to the additional 3% retirement healthcare cost that was just declared to be illegal - but will continue to be removed from my paycheck. I'm hurting just like everyone else in this state. If you have workable solutions, then run for office or at least make sure you have all the facts straight before voicing your opinion.
David Waymire
Tue, 04/24/2012 - 9:59am
I recall several years where the state simply refused to make its payments to the system. Nancy, can you do some research to confirm that. This is every bit as much a result of tax cuts as growth in health and other costs. In 2000, we paid 9.49 percent of state income to cover things like reasonable teacher compensation. Today, we are at about 6.75 percent -- a massive cut, amounting to more than $5 billion a year, that could have been used to pay for the promises that were made, but that our current legislature wants to break. The other half of this is the impact on teacher quality. Clearly, we need to be attracting better -- not worse -- teachers into public schools. Green Hills in Ann Arbor charges $20,000 per student to find good teachers to teach the children of wealthy families. We are now paying about $11,000 per student to teach the children of the rest of us. It's pretty easy to see who will get the best teachers going forward. And it's pretty easy, if you are a bright young kid, to figure out you would be a fool to get into the public education system, run as it is by lawmakers who have no trouble making promises they can't keep.
Tue, 04/24/2012 - 10:38am
Why do you say $11,000 for the rest of us. We up here in a northern Michigan school district only $6700 per student. Eleven thousand would be a gift for us, here. Proposal A was a mistake and never did what it was intended to do. However, that is beside the point here. Teachers already are contributing 3% more toward the early retirees from a few years back. I for one would be willing to consider a reasonable concession on our retirement if it comes to that, but when teachers are constantly lambasted by the public, we get a little testy when yet another thing is being chipped away at. Being the target of ill will gets old mighty quickly. I have a few more years to go to get to 30 years (6, I will be 63 at that point) and hope I have something after working 38 years (some of it in the private sector) altogether when all is said and done.
Tue, 04/24/2012 - 11:09am
I live in Ann Arbor and have the sneaking suspicion that Greenhills teachers aren't better and don't make as much as public school teachers in Ann Arbor. At Greenhills you pay for small class sizes, status and future access to the University of Michigan and other fabulous universities - you don't necessarily pay for better teachers.
Tue, 04/24/2012 - 11:29am
Tax cuts are easy and popular to make for politicians, meeting the State's obligations is irrelevant. How many generations of politicians have "kicked the can down the road" for their successors to deal with? Plenty. The State employees retirement fund is in the neighborhood of $12 Billion, solely because politicians couldn't get their hands on it. Now we have this band of thug Repug brothers who have decided to bleed MI dry in favor of their corporate masters and renege on the State's obligations to the teachers so they can concoct an excuse to privatize education to further enrich their masters. It is a strategy right from the playbook of ALEC, a despicable subversive arm of fascist corporate AmeriKa. If the people of the state fall for this BS then they deserve the outcome which will be a declining standard and quality of life in MI. The alternative is to vote out every House and Senate Repug that is up for re-election in Nov., and recall Snyder.
Jay Larson
Tue, 04/24/2012 - 11:40am
Change the Michigan Constitution such that public service employees are on a defined contribution and not a defined benefit pension plan and provide health benefits for public service retirees in line with the private sector. Our school system budgets encourage schools to retire teachers early; however, the tax payer is still picking up the cost of their early retirement in higher taxes for their pension and healthcare benefits.
Tue, 04/24/2012 - 11:42am
Paul - Unfortunately, the people of hte state fell for the BS during the last 2+ decades, and the outcome IS NOW a declining standard and quality of life in Michigan. If "Repugs" don't facilitate this change now, when do you think someone will kick the can back up the road? Its only going ot get worse. There is no sign of a golden age with unlimited revenue flowing back to the state to pay for unreasonable benefits....benefits that the state's taxpayers don't even see in their private sector worlds. These reforms are needed. There must be a reasonable pension benefit for our teachers. However, there is no shortage of young teachers and future educators in the pipline. If some teachers do not like the change, perhaps its time for htem to move on and tackle challenges in the private sector.
David J
Tue, 04/24/2012 - 12:29pm
As David Waymire intimated; there's SO MUCH MORE to the story being introduced here in Nancy's column. And, I, too, would like to have clarification on the "historically" un/under-funded and exploitive aspects of MSPERS funding explained. As for Rich and Ron; this debacle is ENOUGH reason for at least a minimal pension fund being constitutionally protected -- the future, as we ALL know, will be SHARED SACRIFICE. However, this is belied by the anecdotal individuals' comments Nancy chose to use from "teacher voices" -- ones who DO NOT represent anything close to the AVERAGE/typical educator near to/in retirement -- i.e. disappointment in having to delay retirement beyond "47 or 54 years of age." (I wish Ms. Derringer had solicited quotes and rebuttal from a greater state-wide, reputable/elected spokesperson for teachers/public state employees being served by MSPERS. Additionally, this would indicate that Senate Bill 1040 is simply a punitive attempt that FAILS to address the much LARGER fiscal issue at hand.
Tue, 04/24/2012 - 3:17pm
It would be nice to know what the pension fund rules are for those that retire early. Is the pension reduced for each year a person is under normal retirement age? Do people who work the same number of years and have the same earnings history get the same pension even if their ages are different? Please dig a little deeper into this story so that readers can determine whether the Public Employees Pensions are gold plated or covered in rust.
Tue, 08/14/2012 - 4:01pm
Pensions are based on a formula: 1-1/2 x the number of years worked x the average best three years' salary. Therefore, the more a school employee makes, the more his or her pension. The more years worked, the more his or her pension. Age has nothing to do with it. Sweeteners such as payout for unused sick days or retirement incentives don't count. The buying of up to five years of credit is a non-issue. The cost is actuarially determined and most school employees can't afford it.
Chuck Fellows
Tue, 04/24/2012 - 4:58pm
Stop making the future pay for past mistakes. Our problems reside in the Legislature, not with teachers. Legislators have repeatedly promised "I'll gladly pay you Tuesday for a hamburger today," and every time, we give them another burger. Health care and retirement costs are not the root of our problem. Costs just are, costs. Politicians refusing to admit they made some really short sighted narrow decisions to not pay for obligations when they were incurred are the problem. The solution is to stop making the future pay for past mistakes, step up to the plate and fix it. That means everyone in Michigan has got to pay a little more for education now or pass the indebtedness to future generations. That means politicians have to say the "tax" word out loud and the burger paid for before it is eaten. The real solution is two parts. Pay up now to correct our failure to pay before and put in place retirement systems that vests a little more over sight in the hands of the eventual retirees and less in the "all-knowing" irresponsible Legislature. Health-care costs are a national problem rooted in the health-care and insurance industries. Short-term cutting and whiz-bang budget exercises represent a lack of political will to demand these industries fix their cost problem. If they don't fix it the public will eventually be forced to. Since 35 percent to 50 percent of insurance premiums are spent on administrative costs and Medicare only needs 4 percent, imagine a simple solution. Eliminate insurance companies and reduce health-care costs 35 percent to 50 percent. Easy to do, just pass a law banning insurance companies and implement a single-payer system such as Medicare. To use an example provided by another writer, the auto companies simply let go of their retirement obligations. Maybe its time we simply let go of a system of insurance that is just too expensive to maintain.
Ken Kolk
Wed, 04/25/2012 - 1:06am
The Republicans are to blame for all of this. The Michigan Constitution's education section says that our pensions must be funded when earned and the state is not allowed unfunded accrued obligations. However, Gov. Engler and the Republicans wanted to find money to give his rich friends a tax break by repealing the "intangibles tax (on investments of over $1 million decided that the health benefits did not need to be funded and the state could simply make it a pay as you go fund. The MEA went to Court demanding that these benefits fell under the "unfunded accrued obligations" clause, but the state appealed it up to the State Supreme Court which was and still is controlled by it Republican majority, which ruled that it wasn't unconstitutional so Engler could fund his tax cuts. Well now seeds of a financial disaster is facing Tricky Ricky and the Republicans who control all three branches of the state government . They can't do more against the retired teachers since they have decided to tax our pensions, social security, and 403bs. I guess it is time to reestablish the Intangibles tax, raise the state income taxes back to where they were before Engler came into office and the Republicans bought elections by cutting taxes every two years. Well now the only way out of their mess is to raise taxes, but I'm sure they will try to outlaw public employees unions so they can cut their pay (which would also violate a clause in the constitution that says a teachers pay may not be less than what they received the previous year) end tenure which requires due process before a teacher can be fired so they can fire the older experienced teachers so they can hire young inexperienced teachers which earn much less, and then fire them after 4-5 years when the experiences they had has made them better teachers and replace them with a new inexperienced new graduates form the ed schools.
Ken Kolk
Wed, 04/25/2012 - 1:24am
By the way Rich I worked teaching the students of Michigan (29 of which were 13 year old students) for 47 years and couldn't pass up an offer of 1 years salary spread over 7 years to essentially buying out my tenure and giving the district enough money to save two jobs of the younger teachers. All I received for all my service for the district was two pieces of paper, not even framed, and basically a "thank you very much and don't let the door hit you on the way out!" Oh, i did get a pass to attend HS sporting events free for life, but after years of working at these events to get a little additional money for years and teaching athletes who thought they should get passing grades because they were athletes! I have no desire to attend any more games. All the years I taught the athletic department was the tail that waged the dog. We got less money for supplies, etc because the school athletic department needed more and more money. Save money and be sure all the state money spent on education is actually spent on education by getting athletics out of the schools and make them club sports paid for by the parents of a millage passed by a vote of the voters of the district.
Ken Kolk
Wed, 04/25/2012 - 1:40am
Another savings could be made by paying charter, for profit, schools less per child if they are only K-6, if they don't providefree transportation to and from these schools, If they don't take the same %age of special ed students as the public district they are in by classification, there are different classes for especially difficult to teach. It costs less to teach K-6 than it costs to teach kids in the traditional K-12 public schools. The Republicans want to end free public education. It is interesting that the National Heritage charter schools are owned and managed by a member of the DeVos family and one is even being run by Dick DeVos Jr (the family is one of the two families that own Amway).
Ken Kolk
Wed, 04/25/2012 - 1:42am
The online charter schools should get even less funding since they don't even have to have classrooms and one teacher may end up teaching a thousand kids and getting paid a little as possible.
Jeff Salisbury
Wed, 04/25/2012 - 6:39am
What you say when you don't really know what to say because you just really don't know what you're talking about.. “These things need to be pointed out,” said Campbell, “to help us with our grieving process. This system was built for a different economy. Now it’s a global economy. It used to be affordable. Now it’s not.”
Kevin Warner
Wed, 04/25/2012 - 9:58am
We need to raise taxes on those of us that can afford them, and pay our past obligations. Unilaterally changing current teacher benefits or contribution rates is no different than an employer withholding taxes from the employee's paycheck and not forwarding it to the IRS. It's immoral, and illegal. Services were rendered by teachers with an agreement that compensation [pension] would be received later. This is nothing more than deferred compensation. You promise to work for me today, I promise to pay you later. It is not Teachers fault that State leaders failed in their fiduciary responsibility to sufficiently fund those obligations. But instead chose to hand out tax cuts in order to get re-elected. Proposal A, Charter Schools, Tax cuts throughout the Engler administration, and the shrinking employment base over the past 12 years, all contributed to this ever increasing unfunded debt. But none the less we taxpayers through our elected represented made these promises to these teachers and are obligated to honor these obligations. Snyder and the Republicans in the legislature are taking the easy but immoral position by punishing teachers, while handing out tax cuts to businesses. Remember after all are we not educating these kids to be functional "worker bees" for the direct benefit of "business"? Maybe the solution is for Michigan teachers to incorporate as a "Big Business". Then they too could benefit from Snyder and Republican tax cuts, tax credits, and tax incentives. Peace
Wed, 04/25/2012 - 10:38am
This wouldn't be a problem if the average retirement age was 62. Retirement is guaranteed by the state Constitution but the age at which a person can file for and collect retirement is not guaranteed. Just make people work until traditional retirement age and this will cease being a problem.
Wed, 04/25/2012 - 11:26am
Discussions of the school employee pension issue (and yes, it covers a lot more people than just teachers) usually combine what ought to be two separate questions: First, how do we place some limits on and pay for the benefits of current retirees and those already vested in their pensions and do so in a fair way? Second, what kind of changes might we make (beyond the existing hybrid DB/DC system) for new employees that would be sustainable but also allow us to attract and retain high quality teachers and other employees? Senate Bill 1040 deals with the first question by putting all the costs on current employees, retirees, and students. It deals with the second question by simply cutting retirement health benefits for new hires. You would think, from looking at this legislation, that our public schools provide no benefit to the rest of the state, since no one outside the school system is being asked to help with fixing the pension system. That's nonsense, of course, but it's where fairness and sound policy run up against the current legislative majority's ideological commitment to reducing taxes at any cost. Taxes are the membership fees we pay for living in a comfortable, safe, and prosperous community. You get what you pay for.
Connie Glave
Tue, 05/01/2012 - 6:21pm
We have had years of tax breaks at the State and Federal level that has left government under funded and the debt rising, but somehow it is the Teacher's fault for wanting a pension they can live on in retirement. Where is the call for raising the revenue we need to put police and firefighters back on the street. It is no coincidence that our national debt began its rise in the 1980's when taxes on wealth were cut from 71% to as low as 28% and now the tax on unearned wealth is only 15%. We had a more stable economy with higher taxes. At lower levels we have cyclic bubbles and busts. The Savings and Loans, the dot com bubble,and the housing bubble. With each one the wealthy came out richer than before while the rest of us came out poorer.
Tue, 08/14/2012 - 4:15pm
Another simple solution to a complex problem from someone who doesn't understand how the retirement system operates. As I've said in my previous posts, a school employee's pension is determined by a formula based on the number of years worked and the best, usually final, average salary. The more years worked, the greater the pension. The only real solution is for the current Republican politicians to fulfill their moral obligation and restore the funds that their Republican predecessors took from the system so they could pander to voters with tax cuts they couldn't afford.
Tue, 08/14/2012 - 4:19pm
The above reply was to larold's post.
Thu, 08/23/2012 - 3:04pm
The fact of the matter is: The state of Michigan can not afford to payout the pensions it has promised--especially to those that retire early. People may say this a promise that can't be broken, but what about the times when teachers have gone on strike to get better benefits and pay--I was always told that it was illegal and yet I have seen it happen in the our state many times. I have worked in management all my life and get paid very little for the hours I put in--usually between 50 to 60 hours a week. I also do not have retirement health or pension benefits. Anything I have for retirement, I have had to fund myself. I am not depending on social security--as it too maybe a broken promise.