A spot-on opinion piece from Livingston County, Michigan’s Daily Press & Argus:
A bill introduced in the Michigan Legislature finally takes issue with a growing time bomb — the unsustainable pension and health-care costs for Michigan’s retired public school teachers.
The plan laid out in Senate Bill 1040 has been criticized by teachers’ unions for unfairly shifting costs to teachers. Conversely, conservative voices such as the Mackinac Center for Public Policy say the plan doesn’t go far enough.
But at least it does something, not the least of which is publicize the $45 billion gap between projected retiree benefits and the funds needed to provide those benefits.
It’s unconscionable that Lansing politicians — both parties, the Legislature and two past governors — ignored this problem for decades. As a result, the debt has gotten greater, which means the pain for public education employees and retirees to fix it will be more intense.
But that is how it must be fixed. The alternatives are large tax hikes, which are unrealistic, or slashed educational opportunities for present students, which should be unacceptable.
Spokespeople for teachers’ unions and public retiree groups say the problem started in the 1990s, when the state stopped prefunding retiree health care. That’s when Republican former Gov. John Engler cooled a citizens’ revolt against escalating property taxes by pushing through Proposal A as a new way to fund schools local school districts.
Almost unnoticed was a provision that shifted all of retirement costs to local schools. At that time, local districts set aside about 8 percent of their payroll to cover future retiree costs.
Since then, the burden to local budgets has skyrocketed, thanks to a generous health-care plan, rising medical costs, deflated investment returns and liberal eligibility rules. Today, schools need to set aside about 27 percent of their payroll to meet retirement costs.
Those are dollars that could be spent on school books, raises for teachers, hiring additional staff, staying abreast of new technology and proper building maintenance.
It’s not like this problem is a surprise. It was almost a decade ago that Tom Watkins, who was then superintendent of state schools, clearly spelled out that the benefit system was unsustainable. For every three new dollars of public funding, he said, two would be needed to pay for increased benefit costs.
He was right. For his clarity, he was forced out by then-Gov. Jennifer Granholm because the truth upset her union constituency.
She wasn’t alone, however. Republicans were every bit as timid about the issue. In fact, a couple of years ago, they supported an ill-advised early buyout scheme that only worsened the problem.
There is still an attempt by some to bury their heads in the sand. Defenders rely on the unrealistic assumptions that investment funds will grow by an average of 8 percent a year and that incoming teacher ranks will grow annually by 3.5 percent a year.
A lot needs to be done right away. The retirement age, which can be as early as 55, has to be changed. Rules for buying retirement years and loopholes that grow benefits must be scrapped.
More important, and more painful for retirees who planned their futures in good faith, there must be adjustments to employee contributions and deductibles for the health plan, which most say is the largest drag on the system.
Senate Bill 1040 also calls for a bigger chunk taken from current paychecks to fund the retirement plan. That will be vigorously fought by the Michigan Education Association, the state’s largest teachers’ union.
This will not be fun. But it must be done. Inaction means that the funding gap just gets greater.
“If we do nothing, there could be a point in time when employees go to ask for their retirement check, and there’s no money in the kitty,” said Rep. Bill Rogers, R-Genoa Township, who helped craft the legislation. “The reality is, it has to be addressed.”
The reality is, it should have been addressed a long time ago.