DARWIN BOOHER: In need of reform

Michigan is facing a looming problem that already is affecting our schools and could jeopardize the retirement plans of our teachers. The Michigan Public School Employees Retirement System, or MPSERS, was created to help provide our teachers with a secure retirement. Thousands of school employees are currently relying on the system or are counting on it to be there when they retire. Due to a variety of reasons, the system has an unfunded liability of more than $45 billion. That is nearly as large as the entire state budget and will only get worse if we continue to do nothing. According to the nonpartisan Senate Fiscal Agency, between 2000 and 2010, the unfunded accrued liability in the MPSERS pension system grew from $246 million to $17.6 billion. The unfunded liability in the retirement health care system is $28 billion – more than $10 billion greater than the pension system’s liability. As alarming as those figures are to comprehend, these numbers are from the end of 2010, meaning the actual current liability for both benefits is likely much larger. The cost of the system is already having an effect on the classroom, with school contributions to MPSERS accounting for an average of 24 percent of a school’s payroll. The Michigan Office of Retirement Services estimates that this will reach an average of more than 30 percent of a school’s budget in two years and could be as much as 40 percent within a decade. We must remember that each dollar a school spends on retirement costs is a dollar not going into the classroom to educate our students. Failure to act now to ensure the long-term viability and sustainability of the MPSERS program could either mean taking more dollars from the classroom to pay retirement costs or putting the entire retiree health care benefit at risk. The Senate recently approved a plan that will address MPSERS’ escalating debt in a way that allows us to fulfill our obligations to our current retirees, preserves the program so it will be there when current school employees retire and helps direct more dollars into the classroom to teach our children. Under Senate Bill 1040, as passed by the Senate, current retirees would see no change to their pensions. Most active school employees would have three options, including choosing to move to a 401(k)-type plan. Everyone would be required to contribute the same amount retired state workers now have to pay for retiree health care – 20 percent of their premium. The state and employers will cover the remaining 80 percent of the cost. The system is complex and so is the solution, but the two main priorities of the reform are fairness and stability. The reform will enable active employees to choose the option that best fits their needs, preserve the system for the long term and ensure we treat all the people who rely on MPSERS as fairly as possible. Failure to act and pushing this crisis onto future leaders is not a rational option. I was elected to help fix our state’s problems, not sit idly by and watch an important retirement system drive itself off a cliff. Doing nothing is irresponsible, and we owe it to everyone involved – our students, taxpayers and school employees – to address this $45 billion liability and make sure MPSERS is affordable, sustainable and fair. The Senate plan may not be the ultimate solution, but our action has begun the dialogue about how best to resolve this financial challenge.