To illustrate the trouble plaguing the auto industry, über-investor Warren Buffet reportedly quipped that General Motors is "a health and benefits company with an auto company attached." In the same way, Michigan’s public school system has become an education employees’ health and benefits provider with classrooms attached. But Proposal 5, an education spending mandate placed on the November ballot by Michigan’s education unions, would only exacerbate these costly and misguided public education priorities.
Rather than resolving the financial puzzles resulting from over-commitments to health care, transportation, custodial service, food service and even rental real estate, the education unions instead propose to fix the spending problems with more spending.
About $386 million — more than half of the first year costs of Proposal 5 — will be dedicated toward paying for the steeply escalating cost of Michigan’s public school employees’ pension system. Very few Michigan taxpayers will ever enjoy retirement benefits comparable to those that they are providing to Michigan school employees, most notably a health care benefit that is available for retirees who leave the workforce as early as their mid-50s.
The generous nature of education employee pensions is overtly stated on the Web page that contains information about their benefits. The site greets them with the message: "you are eligible for one of the best public pensions around." Indeed, only one-third of private sector employers offer health care benefits to their retirees. The figure is just three-percent for smaller private employers. The reason for this is clear when one examines the cost: Within 10 years the retired teacher health care benefit will cost taxpayers more than all the rest of the pension benefit.
A recent study revealed that a health policy for the average school district employee is more than $2,000 higher than it is for the average state government employee. One reason for the disparity is that most school districts purchase health insurance from the Michigan Education Association, the state’s largest teachers union and a primary supporter of Proposal 5. As a rule, local education unions insist upon MEA insurance when they bargain for contracts. But by switching from the MEA plan to a Blue Cross Blue Shield plan, the Pinckney Community Schools saved $800,000 — about $150 per pupil. The Michigan Senate estimates that if all school districts would competitively bid out and bulk purchase health care benefits, the first-year savings would exceed $150 million.
Custodial help, food service and pupil transportation are other areas where public education often pays too much. The East Lansing Public Schools privatized custodial service for the 2003-2004 school year and saved $800,000 – or about $200 per pupil. Other public school districts report similar results, but the majority still do the non-education work themselves.
Michigan’s public universities are also no strangers to straying from their educational mission. Michigan State University recently upgraded many of its dorms with luxury amenities, including Jacuzzi tubs, specifically to prevent students from signing lease agreements with off-campus landlords. Whether or not the school can become competitive in the East Lansing housing market, it is hardly an educational necessity to even make the attempt when there are private property owners who can clearly fill this need while adding to the tax base.
Michigan taxpayers and students have been very generous with their dollars toward public education. Making an annual average of more than $54,000, our public school teachers are among the nation’s highest paid, and we are also among the nation’s leaders in public school spending at all levels. Proposal 5’s mandate to spend more money is not needed to make Michigan a high-spending state for public education: We’re already there.
The main question regarding Proposal 5 is about spending priorities. Should public education continue to overpay for benefits and services when other employers do not, or should it work to bring costs under control before going to the public trough and demanding more? As General Motors struggles to become a car company once again, Proposal 5 asks Michiganians whether or not we expect public schools to focus on education.
Kenneth M. Braun is a policy analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich.