Debate in Michigan: Teacher pensions or 401(k)?
Republican lawmakers are trying again to get rid of the pension system and force new teachers into a 401(k) type of retirement plan. Gov.
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Left to ponder how the ongoing political debate will impact their lives are the teachers, who say they are counting on the pensions to help cushion their retirement.
"It seems like if the new teachers are not paying into the pension system. As years go on there will be less and less money to support payments out to the people who are retiring," Winchester said, noting she may have to work longer than anticipated to make up for potential shortfalls in pension funds.
If lawmakers succeed in their plans to fundamentally change retirement benefits for teachers, "I would feel less guaranteed to have a pension payment. I've counted on that," she said.
Yes, it's complicated
The Michigan Public School Employee Retirement System -- or MPSERS -- is a complicated issue. There's no argument that it is a huge liability for the state and is now pegged at
Teachers have a choice: The hybrid plan combines a traditional pension plan with a tax-deferred investment account, or teachers can pick an option that is just like a 401(k).
Most new school employees choose the hybrid plan, said
It doesn't compare to the traditional pension plan, he said, but compared to a 401(k)-type plan, it's "the better long-term plan for retirement," Pratt said.
In addition, the state has been adding roughly
But the debt is still a drag on the budget and
"It's a significant debt issue for the state, and if we're going to stop digging the hole, we have to look at it," said Senate Majority Leader
Sen.
Speaker of the House
"If we could lower those pension costs, we could get more money into the classroom," Leonard said.
As a result, as the
Shifting those savings into the MPSERS debt will be the subject of intense negotiation as the final touches are put on the budget in the coming weeks.
"The governor is open to reviewing legislative proposals and budgetary impacts" of MPSERS proposals, said
Fundamentally changing the teacher retirement system is something the Legislature has tried before. In November,
The transition costs would be what the state and school districts would have to contribute into the MPSERS system to meet retirement obligations to teachers in the plan -- at the same time that the system is losing money from contributions that new teachers are no longer making into the system because they've been shifted to a 401(k) plan.
But Meekhof said he's seen different, less costly numbers on the transition costs, although he didn't reveal what the numbers were or where they came from, and wants the issue to be brought up again as final budget negotiations heat up, noting, "We wouldn't work this hard to save money on the side if we didn't think we were going to do it with this budget."
The opposition
There is likely to be strong opposition from unions representing teachers and Democratic lawmakers.
Closing the pension system to new teachers would make the teaching profession less attractive for new teachers, he said. That would be a challenge in a state that has seen steep declines in the number of people entering teacher preparation programs -- a problem that has led to shortages in some critical subjects.
"If you continue to attack the livelihood of school employees, it's only going to exacerbate the existing teacher shortage," Pratt said. "In some cases, it will be this thing that chases people out of the profession entirely."
While Democratic lawmakers want to salvage the pension system for teachers, they also think the money
"As a Lions fan, I'm used to hearing just wait until next year. And that's what people are hearing from their senators that we should just wait until next year to get better roads. But every year we don't invest, the roads are going to get worse," Hertel said.
As for the changes to MPSERS, he said the issue is just a continuation of
"We switched to the hybrid plan and it's working," Hertel said. "We've de-professionalized the teaching profession so much that it's really hard to get teachers right now. So to make any further cuts to benefits makes no sense to me."
No bills have been introduced yet this year on the MPSERS reform, but the Legislature still has six weeks scheduled until it breaks for the summer.
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