Editorial: Don’t delay teacher pension overhaul

The Detroit News

Republican lawmakers did the right thing last week by introducing legislation that would close off the Michigan school employees’ pension system to new members. Moving new hires into a 401(k)-style plan is in the best interest of both teachers and taxpayers.

And really, what’s the alternative? Options are limited to reform the Michigan Public School Employees Retirement System. The glaring $29.1 billion in pension debt won’t go away on its own, as Democrats and teachers unions would have you believe. It will continue to grow at an exponential rate.

Only 60 percent of the money needed to pay the system’s costs has been set aside, according to the Mackinac Center for Public Policy.

So, lawmakers can either take money from other areas of the budget to pay down the unfunded liabilities, or schools will have to keep shifting more from their classroom budgets to meet the obligation. Already, 37 percent of school payroll costs is going to the pension system.

Neither alternative solves the problem.

The only solution is to move in a different direction — one that won’t saddle future generations with an even greater mess.

These bills would offer a broad fix to the pension crisis, something that other attempts have failed to do.

As James Hohman, assistant director of fiscal policy at the Mackinac Center, says: “The mismanaged teacher pension system is the largest single cause of financial stress for Michigan’s public schools. If we had fixed MPSERS when we should have, we could have more than $1,600 per student in our public schools this year rather than going to pay off debt.”

The Michigan constitution protects the pensions earned by current and former school employees. That’s not up for debate. What these bills would do is pave the way for a more secure financial future for the state, while giving new school employees more direct control of their retirement investments.

Senate Education Committee Chairman Phil Pavlov, R-St. Clair Township, is the sponsor of the legislation in his chamber. This is an issue that’s been a priority for him in past sessions, and it’s something the term-limited lawmaker wants to finish before he leaves office.

“Michigan has promised secure retirement benefits to more than 400,000 public school teachers and staff statewide, but the pension system we built to do that is failing them,” said Pavlov in a statement.

Pavlov’s plan would offer employees a fairly robust plan, with the employer contributing 4 percent of wages into a defined contribution plan. The employee could then contribute another 3 percent which would be matched by the employer for a total of 10 percent annually.

Many new teachers would be better off without pensions. In a piece for Education Next, Chad Aldeman and Kelly Robson of Bellwether Education Partners found only 20 percent of teachers stay in the classroom long enough to qualify for their maximum pension benefit. And a minority of teachers will vest in their plans. That’s true in Michigan, too.

Unions may think they can better entice new teachers with pensions, but the reality is many millennials and other mid-career workers would rather have a retirement system that can move with them.

More than 90 percent of private sector workers with retirement plans have 401(k)s. Now’s the time for Michigan teachers to join them.