School Employee Pension Reform the Key to Budget Problems

Negotiations between the Legislature and Gov. Jennifer Granholm continue as to how Michigan can best resolve its overspending crisis. One solution should be to reform the school employee pension system.

The Mackinac Center for Public Policy has long advocated that school employee pensions be restructured from a defined benefit plan to a defined contribution plan. School districts are in dire need of such help. They are now paying close to 20 percent of payroll into the Michigan Public School Employee Retirement System, and that figure is expected to reach close to 30 percent by 2020. Changing to a defined contribution plan, such as a 401(k) that is commonly found in the private sector, could help schools save millions of dollars each year and shift them where they belong — the core mission of educating students.

Below are links to research written by Mackinac Center scholars in the past few years, all of which contain information legislators would be wise to consider as they attempt to solve the problem of costly school employee pensions.