I’ve written about the state of Michigan’s public school employee retirement system (MPSERS) so much, I almost don’t have the energy to do so anymore.
But this problem is so enormous, we have to continue to bring attention to it. If you don’t understand MPSERS you cannot understand school budgets and employee contracts.
For those intellectually curious masochists out there, please review my MPSERS tag cloud to read many of my past posts on the miserable topic – and here’s the latest installment.
In his Executive budget proposal, Gov. Rick Snyder laid out a generally optimistic picture for K-12 funding. Less fanfare was given to his recommendation to increase the percentage local school districts must pay on their employees’ behalf to fund the retirement system for current and future public school retirees. This graphic shows the history of this rate since the dawn of the Proposal A era.
Visually it should be stunning enough, but let’s look at some numbers to see how it affects the Grosse Pointe Public School System. For those outside of Grosse Pointe, though, I expect either proportionally or in trend this is about the same for every traditional public school district in Michigan.
[table id=12 /]
To make what could be a very long story short, this data tells us state funding is not coming remotely close to keeping pace with the MPSERS costs the state foists upon local school districts. These costs are eroding traditional local school system budgets at a destructive pace and scale.
This isn’t a criticism of Gov. Snyder. He didn’t create this problem. He should, however, avoid overly rosy spins on his presentation of the state budget. I would further predict that MPSERS reform and accelerated conversion from a defined benefit to a defined contribution model will be high on his 2012 agenda.
The net effect of this conversion alone, though, will increase the legacy burden costs to local districts in the short term. The elephant in Lansing’s capitol rotunda is serious reform of the retiree health care program that, unlike the pension system, is not constitutionally protected.
The bigger beef all Michigan taxpayers should have is how charter schools in the state, now uncapped, can escape these legacy costs. This is practically criminal and Lansing lawmakers failed miserably on this front.
Regardless of what Lansing does, local school district employees must understand this dynamic as well. This isn’t out of control Board spending. These are cost increases mandated by Lansing to fund a benefit they will enjoy.
District payments on behalf of employees will have increased nearly $8,400 on average over the last six years. MPSERS as a percentage of their total compensation will have nearly doubled in that time. In 2013-14 the district will come close to paying $20,000 per year to your retirement. Uh, wow.
There’s no other way to put it. This isn’t going to work at our current trajectory. Something’s got to give and I’m not expecting it to be in the form of funding from Lansing commensurate with these cost increases.
4 responses to “New depths for old obligations”
I am a Bus Driver for UCS. We pay our MPSERS The district does not pay ours. 10% comes out of our check
Dear Mr. Walsh,
Thanks, again, for your graphic presentation of the MPSERS dilemma. While you speak to many of the most important aspects of the current issues, the current situation surrounding public teachers’ compensation is a little more complicated that your presentation of the numbers suggests.
Wholeheartedly I agree with you on the following points:
-The spin in Lansing is distorted when it presents school financials: The state-provided funding via Proposal A doesn’t keep pace with employee cost increases (especially the one that Lansing indirectly or directly sets-the MPSERS rates). While Snyder promises a 1% increase to school funding, when coupled with a projected 7% increase in retirement contribution by the district, it results in less revenue available to the district to allocate to existing employee compensation and results in decreasing each employee’s total compensation available.
-Charter schools are a drain to public employees’ compensation and to traditional schools’ available revenues. This results both when their students leave for charters, even though charter performance has underperformed those of public schools serving the same populations of students. It also results from the charters not contributing to the public retirement system. Profiteers running charters schools further drain revenues formerly available for public employee compensation by skimming their administrative “costs.” Other less ethical practices are possible in charters due to lack of oversight and transparency normally existing in traditional public school settings.
-A vicious, self-perpetuating cycle of privatizing public education employees (in a variety of venues from substitute teachers, coaches, transportation providers, etc.) further erodes the viability of the public employees’ retirement system. Instead of paying into the retirement system, we pay into profiteers’ off shore accounts in the Caymans, for example.
-Current Lansing politicians aren’t going to help the situation.
I disagree with what I think you are attempting to say in the following areas:
-You say this isn’t the result of “out of control Board spending” but many GPEA members have produced lists of many ways that the Board could ameliorate some of the hits we have taken in compensation with reduced spending in several key areas.
-Referring to our bargained compensation costs and constitutionally guaranteed retirement program as “legacy costs” is better than referring to them as “unpleasant legacy cost problem[s],” but we would like you and the public to think of them as part of our total compensation package for work we perform as professionals as public service workers. We regret that our compensation is continually being presented as a tax payer burden rather than compensation we deserve for the excellent service we provide. Our students deserve a fully-funded educational system in order to compete globally.
-Converting our retirement plan from a defined benefit to a defined contribution is what you suggest as a viable solution. This process began with the last set of legislation surrounding our plan. While other types of employer/employee relationships exist surrounding employee benefit plans, this compensation package is what our members collectively want, have collectively bargained for (via selecting the profession with its existing parameters), and have collectively sacrificed in other areas of our lives in order to maintain. We prefer to continue with the current plan although we would continue to consider allowing our employees a choice in types of plans.
These are some areas in which more consideration is needed:
Is part of the reason that the districts are being asked to contribute more to the MPSERS the result of a “bad retirement plan?” Could it also be the result of (a.) a failing economy that diminishes the rate of return on the capital the plan holds (b.) Lansing politicians “raiding the retirement fund” with ill-conceived funding back in the 90’s (the Engler years) and an appropriate adjudicated adjustment in the current reality (c.) the current administration’s decisions to divert funding from public education to other entities more favorable (and profitable) to their cronies (d.) decisions to help the current budget issues with band aid fixes like early retirement incentives to all state employees-resulting in 25,000 people currently receiving retirement benefits at a higher rate rather than paying into the retirement system?
Let’s take your argument and flip it. Let’s say that we look at the compensation of GPEA members over the same time periods that your data show. If we look at our pay schedule, we have taken huge cuts in pay. If you look at each employee’s salary when corrected for inflation and subtract costs associated with what we must do to increase our salaries on the schedule (schooling) and keep our certification current, there is a relative major decrease in our income over the same time periods. Those are the sacrifices we make for the certainty of health care and retirement benefits.
Don’t even get me started on talking about our profession’s status here in the US when compared to that of other “countries” against whom we are stacked in comparative performance analyses.
While we don’t want to be thought of as being a burden on our fellow tax payers, we know that in this economy, there are losers and there are winners. We are grateful to have jobs and to have been able to hold fairly steady with some sacrifices in our financial status. We are grateful to work in a school district that values the service we provide even while it may talk about de-valuing it. However we resent the patronizing tone coming from Lansing about our profession, and we resent having our politicians ignore our voices and presence when making decisions about our profession and its status. We resent that when it comes from our local politicians as well and especially when it comes from our administrators, making decisions that impact our pay, and pedantically trying to paint us as being greedy for voicing our discontent.
We put a statement in our contract that politicizes every financial decision that the district makes, despite our not having the power to make any financial decisions. In an earlier blog and at a Board meeting, you lamented the lack of ability to be able to make few decisions about the financial drivers that control the district’s finances. We control even fewer.
The administration and Board’s ignoring our input when making those decisions will have both financial and political costs. That trust that the contract engendered must extend to your considering us as equal voices in making financial decisions. Otherwise, our members won’t likely engender you with our trust again.
Hi Dr. Beyerlein,
That’s quite a mouthful. You’ve got a lot in there that, if you were to look again and also look at many of my previous posts, I think a more balanced response would be in order. I’d point to the editorial I had published in the Free Press as exhibit A.
As a Board member, I have no choice but to accept Proposal A and MPSERS as realities with which we must deal. While I may have opinions about these systems, and I do share them, until Lansing changes them, they are our collective reality.
As for assertions about employee total compensation, please refer to our most recent Budget Modeling Utility report. It foots to our audit reports and shows steady increases in total employee compensation. As to how that compares to inflation and cost of training, I’d suggest that most professionals, including myself, has similar experiences.
I am seeing this recurring theme presented by you and others that I am ignoring the opinions of our employees. It’s convenient for the tired narrative of the big, mean, out of control Board persecuting employees, but it’s not founded in fact. If such “lists” offering cost savings exist, you have never presented them to the Board. But I’m already ahead of this issue.
As Treasurer I am charged with creating the Resolution that will guide budget development. Well before you posted this comment, that Resolution’s proposal had already been published and it calls out specifically to the GPPSS recognized bargaining unit to present their budget ideas in a formal manner to the Board. So before you or anyone even asked to be heard, I’m on record having asked your opinion – and I am eager to hear it.
Therefore your charge that I am “ignoring your input” is grossly inaccurate. I look forward to collaboration with our wonderful employees within the construct of a school funding system approved by the citizens of the State of Michigan.
Brendan
The GPEA has put forward many cost containment strategies via several venues. We voice our concerns to the building administrators and to the administrators at 389, through what we think are our proper channels. I have personally written the Board or spoken at meetings, asking the Board to consider small, albeit significant savings, and to consider funding items via different mechanisms in order to conserve the Fund Surplus at the Board’s preferred amount. If you’d like me to elaborate on those previous pleas, I will.
I am circulating through the buildings (only have the two high schools and Pierce MS remaining on my route). The GPEA members are collectively contributing their recommendations for shielding the Fund Surplus from being depleted and I am compiling their comments. I will not only share that document with the superintendent, but I will also share it with Mrs. Gafa and you very soon. Thanks for considering our input and for all you do in service of the schools.
If my narrative seems tired, get some rest, because we need your help to fix things.
Ranae