In the 2000 election, Colorado citizens ratified Amendment 23, which requires annual, automatic spending increases for primary and secondary public education. That decision has significance for Michigan, where a more costly spending mandate may be on the November 2006 ballot. Amendment 23 became a budget-buster for Colorado, and Michigan voters would be wise to heed its lessons when confronted by its pricey cousin: the "K-16 Proposal."
When they voted to approve Amendment 23, Colorado taxpayers were receiving refunds from annual state budget surpluses of nearly $1 billion. A study conducted by the Colorado Legislature after Amendment 23 went into effect summarized the budget environment of the day: "It was widely believed that the state’s surplus had grown so large that an economic downturn would not eliminate it." Yet, even with estimates showing that the amendment’s spending could be paid for with only a portion of taxpayers’ refund checks, more than 47 percent voted against it.
These "widely believed" calculations were revealed as excessively optimistic when a recession began just as Amendment 23 was implemented. By 2005, state tax collections were running more than $200 million less than they had been in 2001, yet mandated public education spending had spiked more than $700 million. Numerous other popular state programs received disproportionately large cuts due to this nearly billion-dollar discrepancy. Last year, with the state coming out of its recession and budget experts again projecting surpluses, advocates of the programs that had been cut successfully worked to pass yet another spending mandate. Referendum C, as it is known, will allow the state to keep all of the projected surpluses for the next five years. What had begun as a partial reduction of taxpayer refunds has resulted in a five-year elimination of the refund — at an estimated cost to taxpayers of $4.25 billion. In both cases, nearly half of Colorado voters opposed the spending mandates.
Similarly, the K-16 Proposal in Michigan would cost more and accomplish less than its advocates are sharing with Michigan taxpayers. The proposal would require inflationary increases for public school districts, universities and community colleges, with more than half of the spending likely going toward the preservation of an antiquated public school employee pension program, the costs of which are expected to skyrocket over the next decade.
Public school employee retirement benefits are vastly superior to and more expensive than what is available to most Michigan taxpayers. Michigan Public School Employees Retirement System literature boasts that it is "one of the best public pensions around." In addition to a pension, public school retirees also are covered by a healthcare benefit until they are old enough for Medicare. Just one-third of all private employees and only 3 percent of those working in firms with fewer than 200 employees receive a comparable benefit. This number is shrinking every day, as governments and large employers like Delphi adjust to the fact that such obligations are driving them to financial ruin.
Rapidly rising MPSERS costs are threatening to devour nearly every additional dollar in state aid to school districts. These benefits must be brought in line with what the vast majority of other taxpayers receive, or the costs are projected to get far worse. Rather than reform, the K-16 Proposal would require a massive subsidy from the state to bail out the school districts, relieving them of all projected MPSERS cost increases and hiding the problem in a larger general budget. Half of the K-16 Proposal’s spending will be dedicated to MPSERS as early as 2008, and potentially more than two-thirds will go toward teachers’ pensions after a decade. The K-16 plan is a financial shell game devised to conceal rather than correct a serious problem.
Amendment 23 and the K-16 proposal each require increased spending regardless of the economic condition of the state. Michigan voters would be wise to keep Colorado in mind for this reason. But Colorado tells less than half of the gloomy K-16 story. If enacted, a majority of taxpayer dollars spent on the K-16 Proposal will go toward propping up an outdated and expensive pension benefit that few taxpayers will ever enjoy themselves.
Kenneth M. Braun is a policy analyst specializing in fiscal and budgetary issues for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.