Posted on 07/16/2014 11:20:01 AM PDT by MichCapCon
What started out as a $155 million tab in 2012 for public school employee pension and retirement health care costs will increase to $945 million by 2015, according to the Senate Fiscal Agency.
The driver of the escalating costs is MPSERS' unfunded liability. The pension system's unfunded liability was $25.8 billion in 2013, up from $24.3 billion in 2012. The state's payments also go to defray retiree health care costs.
The costs for the Michigan Public School Employees Retirement System includes the $882.7 million the state is projecting to spend on retirement contributions for K-12 education in 2015 plus the costs for community colleges, libraries and higher education.
One reason the costs are increasing is that school districts didn't meet the annual required contributions for pension costs, said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. In 2013, the state determined the cost was $1.9 billion, but districts paid $1.36 billion, according to state's 2013 annual audit.
Also, Hohman said that for years the Legislature has used "gimmicks" to get out of paying the full upfront costs of MPSERS.
For example, in 2007 the Legislature voted to mark assets to market rates, which allowed them to put less money into the pension system. In 2010, the state Legislature approved an early retirement incentive that saved $169 million on salaries but added an additional $1 billion in unfunded liabilities to MPSERS. Then, in 2012, the Legislature doubled the time the state has to pay off the early retirement incentive costs from the traditional five years to 10 years.
Hohman said that has led to a "catastrophic debt in the pension system that is sending our current legislators scrambling to find payments."
Leon Drolet, chairman of the Michigan Taxpayers Alliance, said government is good at finding a way to put off paying costs.
"Any tough decision that government can put off, it does put off," Drolet said. "If there is a way to kick the can down the road, they are brilliant at it. It always catches up with them. And the taxpayers pay for it."
I say let the losers that were students of these “educators” do the calculations on their pensions, that should send the state all the way to bankruptcy.
To be fair, they have already made changes on the backs of the newer teachers.
By “they” I mean the legislator’s and the deal making teacher’s union. About three years ago they unilaterally put in place new rules that now make it where newer teachers hired since 2009 who didn’t have pensions in-place yet get neither pensions or tenure until they have been employed by the system for TEN years.
The whole issue of tenure and its rules aside, it is hardly fair to have teacher’s whose pay and districts contribute to the funds (under funded although it may be) not have any pension until a ten year cliff funding deal is in place when it was a three year rule for some participation when they took their jobs.
A thirty-two year old teacher has to hopefully wait and just blindly trust that they will keep employment with the system for ten years or they get Nothing from the pension system if they loose their job at age 41 due to cut backs or illness.
I have a lot of problems with our public schooling system in general, a lot of problems with teachers’ unions and associations, but the individual teachers I know are like any job under government control — there are a decent percentage of good people that are getting shafted.
In these systems they have a certain amount of ability to savings systems, but since there is a pension system held out as the carrot there is no matching percentage like their is in private industry which has largely abandoned the Defined Benefit Pension program.
There may be states that have made no changes, but Michigan has done some changing and that has been done on the backs of every teacher that was not vested when they changed the rules a few years ago.
I have a sister-in-law who was an “educator” in Michigan until she retired in her early 50’s about 15 years ago. She is an intolerant liberal and quite the self-inflated dumb-a** LIB who apparently knows everything. I laugh if the wheels fall off her gravy train. What an unrepentant idiot.
They can then compete for living space with the bridge trolls.
Are the pension funds jammed into bonds and commodities like so many others? If so, that would be another impending loss.
The union opt out date is next month and there’s going to be a blood bath.
I have a better idea: Eradicate government pensions at all levels and let them save and invest for their own retirements like adults. Let the old grifters keep their ill gotten gains to buy off the unions, but nothing for new hires beyond the salary the market for their talents will bear.
Teachers with less than ten years don’t get “Nothing.” They are entitled to whatever contributions toward the pension system they made during their employment, and it likely accrues 6% interest for as long as it remains in the pension fund. Since retirement contributions are pre-tax they will likely be able to roll that money into an IRA at the end of their employment.
Teachers are also allowed to contribute pre-tax up to $17,500 or more per year to a tax deferred 457 plan, which can also be rolled over to an IRA at the end of their employment.
They have plenty of retirement planning options no matter how long they work as a teacher or how long it takes to vest in the main pension.
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