Michigan voters faced a crowded ballot in November. One initiative, Proposal 5, would have mandated public education funding increases every year. Voters rejected the measure 62-38, in large part because school employee pensions became a major issue.
Citing decreased state per-student grants and asserting a connection between education spending and economic growth, the "K-16 Coalition" fought for the measure with dozens of glossy mailings, radio advertisements and yard signs. Citizens for Education, a political action committee backed by the Michigan Education Association union, received more than $4 million in contributions, including $3.4 million from the National Education Association union. Its other supporters included local unions and union officials.
Those contributions were about double what the groups opposing Proposal 5 received, according to campaign disclosures filed with the Michigan Secretary of State.
Rep. Jack Hoogendyk, a member of the House Tax Policy Committee, attributes the defeat of Proposal 5 to the intelligence of voters.
"People are a little smarter than some gave them credit for," he said from his Lansing office recently. "They do read and understand the proposals, and Michigan by and large is a conservative state when it comes to fiscal or tax or social policy. It’s more than just the results of Democrats versus Republicans."
To that end, Hoogendyk points not only to the drubbing of the mandated school funding measure, but also the passage of a civil rights initiative and a private property protection initiative.
Hoogendyk said the Proposal 5 defeat should not be seen as an anti-education vote.
"About the only local millage you can get passed anymore is for the schools, but only when they believe it’s for the kids."
The majority of the cost behind Proposal 5, Hoogendyk said, was for teacher pensions.
Ken Braun, a policy analyst for the Mackinac Center for Public Policy, agrees.
"Proposal 5 was a referendum on the cost of public education pensions," said Braun, who wrote an extensive policy brief about the issue prior to the election. "Its resounding defeat demonstrates that Michigan taxpayers are cost conscious and demand reform of the teacher pension system, not papering over the problem with more dollars."
Tricia Kinley, the director of tax policy and economic development for the Michigan Chamber of Commerce, said Proposal 5’s defeat means "taxpayers are not willing to just keep throwing money at the education system without getting a return on their investment."
Kinley served as the spokeswoman for the "Coalition to Stop the K-16 Spending Mandate," comprised of the Chamber and more than 30 taxpayer, local government, law enforcement, professional associations and health care organizations. At least four school boards voted not to support the ballot measure.
"I have to give the Chamber credit," said Ken MacGregor, spokesman for the K-16 Coalition. "The education community was out there all alone while all the special interests were arrayed against it."
Kinley said the K-16 proposal was "a blank check with no accountability measures."
But MacGregor said his group was not avoiding accountability.
"This was not a constitutional amendment, it was a legislative initiative, just like any other appropriations process," MacGregor said. "The accountability part is already in place through the school codes."
Experts, however, point to another issue on voters’ minds: pensions.
While it was well known that Proposal 5 would have mandated annual funding increases for public schools, community colleges and public universities at an amount equal to the rate of inflation, the greater costs would have been tied to shifting future increases in pension funding to the state. Various analyses pegged the total cost of the proposal at as much as $700 million in the first year. This could have skyrocketed to more than $1 billion in additional funding per year, due largely to the pension-funding shift.
"There are only two ways to pay for that," Kinley said. "You either increase taxes or cut services."
Kinley said voters also realized that shifting pension and retiree health insurance costs to the state could harm local schools.
"It ultimately removed any incentive for school boards to make tough decisions at the bargaining table," she said. "They would have been absolved."
MacGregor said the state could have "plenty of revenue" to fund the pension liability if tax cuts from the 1990s were reversed.
"The pension issue wasn’t really the Achilles’ heel," he said.
But a majority of voters in every Michigan county rejected Proposal 5. In 70 of Michigan’s 83 counties, the margin of defeat was 20 or more points.
Given the prominence of pension funding during the election season, many now think that reform will be considered more seriously by policymakers. Some have suggested switching public education employees from a defined-benefit pension plan to a defined-contribution plan.
Such a change, MacGregor said, would not be a cure-all.
"What may work in the private sector doesn’t mean it will work in the public sector," he said.
But Braun noted that many public- and private-sector pensions are moving from defined-benefit to defined-contribution systems. Most Michigan state employees have already made this change.
"Conventional defined-benefit pensions … are being rapidly phased out because of their substantial cost," he said. "If there is a message in the lopsided vote against Proposal 5, it is that Michigan taxpayers want the cost of public school employee benefits brought back into line with the rest of the real world."
Legislation that passed in the Senate last year but failed by a half-dozen votes in the House would have created a defined-contribution pension plan for new teachers, while keeping current teachers and retires in the same defined-benefit plans they’ve always had.
"This should send a message and embolden the Legislature that it’s okay to vote for this change," Hoogendyk said. "The people want it. This kind of change wouldn’t take anything away from anyone; it would simply ask future employees to accept what is the standard in the private sector and is fast becoming the standard in the public sector."
This article originally appeared in The Heartland Institute’s Budget & Tax News.