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
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
"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
"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
"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
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:
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
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
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.