#2 The School Employee Concession Myth

With Michigan’s economy in decline and families departing the state in increasing numbers, tax revenues that pay for our public schools are also falling.[12] Because employee compensation costs consume around 80 percent of most school districts’ operating budgets and also include unsustainable retirement benefit provisions, the Legislature is considering proposals to reduce these expenses.[13]

Notwithstanding fiscal and economic realities, the Michigan Education Association, the state’s largest school employee union, has pulled out all the stops in its efforts to shut down any reforms in this area. One of the union’s tools is a claim that school employees have already made “$1 billion worth” of concessions over the last three years.

The data, however, fails to show any significant reduction in public school labor costs.

Typical of the union’s claims was a 2009 Detroit News column written by MEA President Iris Salters, stating that school employees saved taxpayers $200 million in salary concessions and another $700 million in health insurance reductions over the last three years.[14] The MEA has repeated this claim a number of times, including in recent radio and television advertisements.[15] Only the televised ads cite the source for the claim, referencing the Michigan Department of Education Financial Information Database.

Those “$1 billion in savings,” however, are not found in this data. Instead, it shows that Michigan public schools spent $13.758 billion on school employee compensation in 2006. In 2008 (the latest year available), the number had increased by $39 million to $13.797 billion.[16]

To be sure, the increase was not generated by the two specific items mentioned by the MEA — employee salaries and health insurance — but neither did changes in these two areas come anywhere near to saving $1 billion. Total payments for employee salaries and health insurance stayed level during this period.[17]

In contrast, the unsustainable defined-benefit pension system and post-retirement health care benefits were key contributors to the overall compensation expense increase.

To get a more accurate picture of school employee compensation changes, it is necessary to examine a longer time period. From 2000 to 2008, total compensation for school employees increased by $90 million after adjusting for inflation. The number of students and full-time school employees, however, declined during this same time. When the gross amounts are adjusted to reflect those declines, they show taxpayers shouldering $280 more per pupil in total compensation at the end of this period.[18]

In absolute terms, inflation-adjusted school employee compensation increases have been relatively modest. Compared to the economic devastation and income loss suffered by the rest of the state over the past decade, however, those increases assume a different character.

From 2000 to 2008, the per capita personal income of Michigan’s population plummeted by nearly 5 percent after adjusting for inflation.[19] Total private-sector earnings from 2000 to 2008 — which includes both employee compensation and profits earned by businesses — fell a whopping 12.8 percent in the state, according to the Bureau of Economic Analysis. Not surprisingly, the government’s ability to afford those generous school compensation packages also diminished, with total state tax revenues down 7 percent from 2000 to 2008 after adjusting for inflation.[20]

School employees earning more than the rest of the taxpaying population is nothing new in Michigan. In 1996, the Citizen’s Research Council of Michigan reported that, in proportion to the per capita personal income of taxpayers that support their salaries and benefits, Michigan teachers had the highest pay in the nation.[21]

The most recent data available show that Michigan again ranks number one in the country by this measure, and has done so since the 2003-2004 school year.

Michigan’s economy and the economic well-being of its population have declined dramatically over the last decade. Contrary to union claims, however, there has been no “shared sacrifice” by school employees. If anything, compared to the rest of us, their relative well-being in economic terms has likely never been better.

[12] For a details about Michigan’s outbound migration rates, see: Michael D. LaFaive, “Michigan’s Gift to Texas? People” (Mackinac Center for Public Policy, 2010), http://www.mackinac.org/12667 (accessed October 7, 2010).

[13] Public Act 75 of 2010 was the result of one of the proposals to reduce the costs of school employee retirement benefits. It slightly modified the state-controlled school employee pension program in an attempt to limit future liabilities. For more information about this legislation, see: Jack McHugh, “Analysis: Senate Gop Fumbles, May Approve $25.9 Billion Taxpayer Liability to Satisfy MEA” (Mackinac Center for Public Policy, 2010), http://www.mackinac.org/12702 (accessed October 7, 2010); Jack McHugh, “New Teacher’s ‘Hybrid’ Pension Label a Phony Political Confection” (Mackinac Center for Public Policy, 2010), http://www.mackinac.org/13211 (accessed October 7, 2010).

[14] Iris Salters, “Salters: Michigan Teachers Already Sacrifice for Students,” The Detroit News, August 26, 2009, http://www.mea.org/press/pdf/ salters_082609.pdf (accessed October 7, 2010).

[15] Examples of newspaper articles in which the MEA makes this claim are: Julie Mack, “Pay for Michigan Educators Raises Questions: Can State Afford High Salaries? Should Pay Be Linked to Performance?,” Kalamazoo Gazette, August 9, 2010, http://www.mlive.com/news/kalamazoo/index.ssf/ 2010/08/pay_for_michigan_educators_rai.html (accessed October 7, 2010); Traci L. Weisenbach, “State Associations Sound Off About School Budget Cuts,” Huron Daily Tribune, January 16, 2010, http://www.michigansthumb .com/articles/2010/01/16/news/local_news/doc4b514cd888024955142508.txt; and Iris Salters, “Legislators Need to Properly Fund Schools,” The Detroit News, April 28, 2010, http://mea.org/press/pdf/salters_042810.pdf (accessed October 7, 2010). The MEA also used one of its blogs to further this statistic: Doug Pratt, “Does “S.O.S” Stand for Something Else?,” in MEA Votes (Michigan Education Association, 2010). Links to the radio and television advertisements can be found here: “Teachers and School Employees Launch ‘Punching Bags’ TV Ad at Capitol Rally” (Michigan Education Association, 2010), http://mea.org/press/042310-teachers_and_school_employees_ launch_ads.html (accessed October 7, 2010).

[16] “Financial Information Database Financial Summary Report, 2005-2006” (Center for Educational Performance and Information, http://www.michigan.gov/cepi/0,1607,7-113-21423_35782_49874---,00.html (accessed October 6, 2010); “Financial Information Database Financial Summary Report, 2007-2008” (Center for Educational Performance and Information, http://www.michigan.gov/cepi/0,1607,7-113-21423_35782_49874---,00.html (accessed October 6, 2010).

[17] Ibid.

[18] Author’s calculations based on data provided by the Michigan Department of Education’s Center for Educational Performance and Information. For school fiscal information prior to 2004, “Historical Form B Data” was used (available at http://www.michigan.gov/cepi/0,1607,7-113-21423_35782_40460---,00.html). Fiscal data for 2004 to 2008 was compiled from “Financial Information Database Summary Reports” (http://www.michigan .gov/cepi/0,1607,7-113-21423_35782_49874---,00.html). Pupil count figures came from Mary Ann Cleary and Bethany Wicksall, “School Aid” (Michigan House Fiscal Agency, 2010), 36, http://www.house.mi.gov/hfa/ briefings/School%20Aid%202009-10%20final.pdf (accessed October 7, 2010).

[19] “U.S. and Michigan Per Capita Personal Income: 1970-2009” (Michigan Senate Fiscal Agency), http://www.senate.michigan.gov/sfa/ Economics/US&MichiganPerCapitaPersonalIncome.PDF (accessed October 7, 2010).

[20] “Total Michigan State Government Tax Revenue: FY 1970-71 to FY 2007-08” (Michigan Senate Fiscal Agency), http://www.senate.michigan.gov/ sfa/Revenue/TotalStateTaxRevenue.PDF (accessed October 7, 2010).

[21] “Public School Teacher Pay Relative to Personal Income in Michigan” (Citizen’s Research Council of Michigan, 1996), http://www.crcmich.org/ PUBLICAT/1990s/1996/note9603.pdf (accessed October 7, 2010).