Why the teacher pension system exists
Contrary to the opinion stated in The Detroit News editorial of September 18, “Teacher pensions still need reforming,” Michigan cannot afford to close out the retirement system for public school personnel without causing a number of negative outcomes to the state and therefore Michigan taxpayers.
An independent study commissioned by the Legislature in 2012 detailed the reasons, which were the basis for the decision not to pursue the system’s close out. Chief among them is the enormous cost to prefund the close-out, as well as the serious damage to the state’s budget and credit rating — a point made with great conviction by the governor and state director of the Department of Technology Management and Budget. While it may be easy to dismiss the transition costs, you ignore the fact that Michigan citizens will end up shouldering the short- and long-term costs of closing out the system.
The editorial did not mention that the reforms enacted in 2010 created a hybrid plan that is currently more than 100 percent funded at a cost on par with, if not less expensive than, the plans you would have the state impose. Subjecting hundreds of thousands of people to the whims of the stock market (remember 2007–2009?) when they cease to have a regular income is precisely why pension plans were created, with the safety of the recipient’s retirement in mind.
The News’ characterization of the current funding levels of the pension system is inaccurate and is only a snapshot on a single date that has dramatically improved just in the last year. The reforms made by Gov. Rick Snyder in 2012 reduced long-term debt by roughly a third and eliminated retiree health care for future retirees. The changes have had a positive impact to the system. We should recall that actions taken by the Legislature in the 1990s helped create today’s challenges. It was poor fiscal policy then, which allowed the retirement system, at the time more than 100 percent funded, to be used to pay other obligations of the state.
To refer to the pension system as the “teachers” system does a disservice to both the 100,000-plus non-teacher public school retirees who are members and the additional 100,000-plus non-teacher active public school employees who participate. Additionally, nearly 43 percent of all public school retirees receive a pension of less than $1,000 per month and 59 percent receive less than $2,000 per month. The average pension of a public school retiree is only $1,826 per month. As these numbers indicate, our members do not live the high life on six-figure pensions as some have implied.
Mark Guastella, executive director, Michigan Association of Retired School Personnel