Republican Michigan lawmakers, without the assistance or approval of Gov. Rick Snyder, are again proposing teacher pension reform. It’s a debate that has turned so acrimonious within the GOP ranks that it’s stalled the legislature’s budget negotiations.
The plan introduced in May would block new teachers in the state from enrolling in the teacher pension system. Instead, they would receive a 401(k)-type plan that the GOPs backing it say would be better for them, and much better for taxpayers.
The Michigan Public Schools Employee Retirement System (MPSERS) has turned into an albatross around the neck of the state’s budget. It has accumulated a $29 billion unfunded liability.
The Michigan Legislature tried to fix this once before by adopting a hybrid system that blended a traditional pension plan with a tax-deferred investment account. Teachers were given the option of going with that or choosing a 401(k).
Doug Pratt, the spokesman for the Michigan Education Association, the state’s largest teachers union, said most teachers who were vested went with the hybrid plan.
Rep. Thomas Albert (R), who is sponsoring the House bill to block new teachers from pensions, told the Detroit Free Press the hybrid system was little more than “a Band-Aid for a bullet wound.”
“Big problems require big solutions,” Albert said. “We can help the next generation of teachers and students by being responsible now and laying the financial groundwork for them to be successful. We need to stop passing this debt along to our kids.”
Sen. Phil Pavlov, the Republican leading the charge for this legislation in the Senate, said new teachers would be better off with this new plan.
Pavlov and other supporters of the reform package point out that many Michigan teachers aren’t going to get a pension, no matter what the legislature does with his proposal.
Most teachers flame out and leave the classroom before completing the pension’s 10-year vesting target.
“My reform would provide new teachers and school employees with a retirement benefit that is flexible and fully portable,” Pavlov said. “New employees would have the opportunity to own and build their retirement nest egg on their terms.”
Education Secretary Betsy DeVos’s husband, Amway heir Dick DeVos, told a meeting of the state’s top business leaders that reforming the public employee pension system in Michigan should be the legislature’s top priority.
Gov. Rick Snyder (R) was against a similar proposal in 2012, and he doesn’t like the 2017 teacher pension reform package any better. In fact, the disagreement between Snyder and the Albert-Pavlov team is so severe that budget negotiations between the legislature and the governor broke down in late May.
The Michigan House Fiscal Agency estimated the GOP’s proposal would increase teacher retirement benefit costs in the first year to the state by $410 million. The total cost over the 40-year amortization period covered by the bill could be $46.4 billion.
“This bill just went from dumb to dumber,” said Ron Bieber, president of the Michigan AFL-CIO. “You look at a number like $46 billion and your eyes pop out of your head. And the worst part is, we’ll be leaving thousands of Michigan teachers, bus drivers, and librarians without access to the most efficient and secure method of saving for retirement.”
A poll commissioned by the Michigan Education Association and conducted by EPIC-MRA showed 47 percent of Michigan’s registered voters opposed the GOP plan to restructure teacher pensions.
“These results suggest that any intent on the part of Republican legislators to make the change proposed in the school employee pension system is not based on any belief among their base of support that such a change is needed,” EPIC-MRA concluded.
Michigan’s two biggest newspapers have taken opposite sides in the teacher pension reform debate.
“Moving new teachers and school staff away from an unsustainable system is the best long-term solution,” the Detroit News editorialized. “It would also bring government employees more in line with private-sector workers whose taxes pay their salaries.”
The Detroit Free Press editorial board’s best advice was: Don’t tinker with teacher pensions.
“Why is this such a priority for the Legislature’s right wing? It’s important to note that eliminating public pensions is a top priority of the big-spending DeVos family, whose political contributions have pushed right-to-work reforms, tax reforms and school choice,” the Free Press wrote.
“Lost on lawmakers is that the 401(k)-style investment accounts they’d like to force on all teachers would also be vulnerable to the same stock market crash they say could leave the state on the hook for massive contributions to the hybrid system,” the Free Press added.
Gov. Snyder and the Michigan Legislature will have to figure this out quickly. They are under the pressure of their traditional, self-imposed deadline of approving a new budget for the next fiscal year in early June.
“We’re going to convince him (Snyder) that the math works,” Senate Majority Arlan Meekhof told the Associated Press. “If we don’t stop digging the hole, it just gets bigger and bigger and bigger.”