Newly-hired public school employees in Michigan would pay more for their pensions and lose state-funded health care in retirement under a new bill headed to Gov. Rick Snyder for approval.
Sponsors of Senate Bill 1040, which was approved last Wednesday in the Republican-controlled Michigan House, said it will save school districts an estimated $300 million annually and trim $15 billion in legacy debt, according to The Detroit News.
The bill, which reforms the Michigan Public Schools Employees' Retirement System (MPSERS), eliminates long-term pension and health care liability for Michigan's public schools.
MPSERS, a statewide defined-benefit plan for employees, has liabilities currently totalling more than $48 billion — all of which schools must pay.
"This is truly a historic day for Michigan students, our public schools and thousands of public school retirees who are relying on a viable retirement system," said Rep. Chuck Moss (R-Birmingham) in a release.
"We can finally say, after years and years of talk and inaction, after years of debate and analysis, that we've found a solution to the biggest challenge facing Michigan public schools," he added.
If the bill is signed into law, employees hired after Sept. 4 would pay $2,000 into a health care account, plus a matching contribution of up to 2 percent of their pay toward a 401(k)-type account.
According to Moss's office, Michigan schools have been expected to pay more and more into the state retirement system since 1994. Then, schools paid 5 percent of their payroll into the retirement system. Now schools spend up to 27 percent of their payroll on retirements costs, with payments expected to jump as high as 35 percent in coming years.
"The legislature has finally dealt with the unfunded pension bomb that has haunted Michigan public schools for years," Moss said. "We're capping our liabilities and paying down the debt while providing retirees with a fair and sustainable benefit program for their future."
Michigan Democrats see the bill differently.
"Attacking teachers this way is just another assault on our students who are already suffering mightily from the budget cuts imposed by the governor and the Republicans in the last two budgets," state Rep. Ellen Cogen Lipton, D-Huntington Woods, responded Thursday in a press release.
For Birmingham school board member and former state representative hopeful Rob Lawrence, the bill is good but may not go far enough. One of .
"SB 1040 is at good step towards attempting to solve the massive math problem facing MPSERS," he said. "(But) it does not change the fact that the plan will remain significantly under funded."
"While lawmakers will proclaim a great feat has been accomplished, no one will be fully satisfied with this result," Lawrence added. "People will speak of fairness, promises, and support for schools. In reality the system has been broken for many years, but it was convenient to ignore the problem."
Correction: MPSER's unfunded liabilities come out to $48 billion, not million.