Schools Receiving More and More Money, But it Goes to Pensions

State Representative votes against K-12 budget over district's 'serious' financial situation

Rep. Kurt Heise, R-Plymouth Township, posted on his Facebook account that he voted against the state’s K-12 education budget on June 3. The post cited his concern with Plymouth-Canton Community Schools' “serious financial situation.”

In the last two years the district's expenses exceeded its general fund revenue by a combined $1.8 million. The gap was covered by drawing from $7.9 million in reserves.

However, Plymouth-Canton’s problem is not that it is collecting less money from state and local taxpayers. It is instead the growing burden of funding employee retirement benefits.

In 2010, Plymouth-Canton schools had 18,989 students and received $113.8 million from the state, not including local and federal money. By 2015 enrollment had fallen to 17,508 students while the district received $121.5 million from the state. That's $7.7 million more to spend with 1,481 fewer students to educate.

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But the cost to the district of paying its share of the state-run school employee pension system grew by more than 50 percent, leaping from $13.9 million in 2011-12 to $21.7 million in 2013-14, the most recent year audited numbers are available.

While Heise expressed concern over revenues that fell $1.8 million short of the district's spending over a two-year period, the figures above suggest his focus should be on the cost of the school pension system, to which the district is paying in excess of $7 million more each year than just three years ago.

Plymouth-Canton is not alone. Statewide, unfunded liabilities accumulated by the Michigan Public School Employees' Retirement System (MPSERS) increased from $25.8 billion to $26.5 billion from 2013 to 2014, according to an actuarial report released in May. The cost of "catching up" on decades of persistent and continuing underfunding is what's driving the sharp rise in annual contributions required from school districts (and ultimately from taxpayers).

John Rakolta, a prominent businessman in the region who is involved in a committee seeking solutions to Detroit's debt-ridden school system, recently called MPSERS a “budget killer” for public schools.

At a recent gathering of statewide policymakers, Steven Rhodes, the federal judge who presided over the city of Detroit's bankruptcy, asked, “Isn’t it time for us to be thinking about moving to defined contribution (plans) just like the private sector in this country has?"

In 2012 the state Senate passed a bill to do just that. However, the Republican majority in the House — of which Heise was a member — declined the opportunity the make the change, voting instead to adopt more modest reforms.

Heise said he wouldn’t be opposed to looking at this option, under which future enrollment in MPSERS would be closed and new employees would instead get contributions to 401(k)- type plans.

“I'm not opposed to studying it, if it indeed saves money for the state and local districts,” Heise said in an email.

Nick Brandon, associate director of marketing and external relations for Plymouth-Canton Community Schools, said the district wouldn’t comment.


See also:

Michigan School Pension Fund Liability Grows to $26.5 Billion

Close MPSERS to Stretch Dollars Further

Michigan's Pension Underfunding Problem

10 Facts About Pension Systems in Michigan

Democrats Selectively Considering Pension Benefits in Education Funding

Fixing Michigan's Budget-Killing School Employees' Pension Up in the Air

Closing School Retirement System the Right Choice

State's Cost of Teacher Pension System Quintuples

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