Senate Committee to Consider Bills Attacking MPSERS Defined Benefit Pension Plan
AFT Michigan anticipates a hearing in the coming weeks on Senate K-12 Appropriations Subcommittee hearing on a package of bills aimed at making significant changes to the Michigan Public School Employee Retirement System. Senate Bills 722-728 would shift newly hired public school employees into a defined contribution pension system. The bills would also eliminate future duty disability retirements and prohibit the purchase of service credits.
The proponents of the bills claim that the shift will save schools money while continuing to provide an adequate retirement plan for school employees. However, recent studies have shown that both these assertions are dubious at best. First, closing a defined benefit plan to new hires will end future contributions into that system – thereby requiring additional immediate funds to ensure that the existing unfunded accrued liability can be paid off. Second, comparisons of defined benefit to defined contribution plans have shown that the employer must make a much larger contribution into a defined contribution plan to provide the same level of benefits received from a defined benefit system. These bills would likely end up costing the state millions in immediate required spending while diminishing future pension benefits for all newly hired public school employees.
The bills were originally scheduled for a hearing on September 18, but we received word late Monday that committee meeting was cancelled. In the mean time, AFT Michigan urges its members to contact their State Senators and ask them to oppose this package of legislation. Click here to send an email to your State Senator.
Senate Committee Examines “Early Warning” Legislation for K-12 Schools
Legislation that would require public schools to produce more timely financial data with the intent of giving an earlier warning of districts heading toward fiscal distress had a hearing in the Senate Appropriations Committee on September 10. The bills (SB 951-955, SB 957 and SB 978) are somewhat controversial since many public school administrators feel they will be overly burdensome and have requirements that will require additional spending to meet.
Proponents of the bills complain that current reports from public schools arrive too late to allow the state to step in to effectively prevent fiscal problems. The bills would also provide financial penalties to districts under a Deficit Elimination Plan or Enhanced Deficit Elimination Plan for failure to abide by the plan. The bills would grant the State Superintendent and State Treasurer the ability to require additional periodic reports from schools that they felt were in danger of sliding into deficit spending.
Many school officials, including the Michigan Association of School Boards and the Michigan Association of Intermediate School Administrators, testified that they could not support all of the bills at this point. They shared concerns that the costs of enhanced reporting requirements could be very burdensome on schools that were already facing fiscal crisis.