The new actuary report on the school employee pension fund shows that the state has a $22.4 billion gap between what it has saved for school employees’ retirement and what workers and retirees have earned.
That is a $4.8 billion increase from last year. All told, the costs to catch up on this underfunded system represent nearly $6,000 per Michigan household.
Historian James Coffield once described the British income tax system as “scaffolding for plunder.” Michigan has its own version — hordes of government tax-borrow-and-spend authorities like Downtown Development Authorities, Corridor Improvement Authorities and at least 10 others that get little public or media attention, have minimal accountability, and once created are almost impossible to dismantle.
(Editor’s note: Below are the edited remarks of Mackinac Center President Joseph G. Lehman that he delivered at a 1 p.m. debate Thursday on the “Protect Our Jobs” constitutional ballot initiative during the Detroit Regional Chamber of Commerce’s annual policy conference on Mackinac Island. Lehman was originally scheduled to debate UAW President Bob King, but the “Protect Our Jobs” campaign instead sent a substitute. After the debate, attendees voted 77-23 percent against the union-backed ballot measure.)
A growing number of school districts are seeking competitive bids on noninstructional services from private contractors as a means to save money. For example, Ypsilanti is looking into a plan that might save about $700,000 — $180 per pupil — by contracting out custodial labor.
Taxpayers in scores of Michigan communities may not realize it, but when they send in their winter and summer property tax payments, some of their money is extracted to pay union bosses not for their assigned job duties, but for time spent on union business. That’s because their school board members, mayors and city councils have signed union labor contracts that require taxpayers to compensate union stewards to do union work on government time.
Walter Russell Mead on the “big lie” of government pension systems — like the one Michigan runs for school employees, which could be put on a glide path to elimination if state House Republicans find a way to say to say “yes” to a Senate-passed bill closing the system to new hires starting next year:
A Wall Street Journal editorial today reports on a new Sierra Club campaign to strangle a natural gas revolution that promises both energy security and an American industrial renaissance. The group’s plan is called “Beyond Natural Gas,” and the Journal quotes Sierra Club Executive Director Michael Brune saying, "We're going to be preventing new gas plants from being built wherever we can."
As Michigan legislators debate whether to close the teacher pension fund, a new report on the state’s other major employee pension system — the state employee fund — warns about the need to close the system.
Even though policymakers closed the state employee retirement system to new hires in 1997, thousands of employees still participate in the defined-benefit system and tens of thousands receive benefits. The state has only 61 cents saved for every dollar of benefits earned by members and retirees.
Michigan Information & Research Service News reports that in a legislative battle pitting taxpayers against the prison guards union, the guards have won: There will be no prison privatization in next year’s state budget. This eliminates for now an opportunity to realize hundreds of millions of dollars in savings over the next several years by increasing the incentives of the non-privatized prisons to “sharpen their pencils” and operate more efficiently.
In an article today at Michigan Capitol Confidential, I focus on painting to highlight some of the absurdities in Michigan’s licensing laws. As the article notes, “Michigan law requires painting contractors to pay $235, take 60 hours of state-approved prelicensure education, pass two exams and be over 18 years of age … Michigan is one of only 10 states that licenses painters — and only five states require any education to paint for a living.”
The headline from a recent Reason-Rupe poll of Wisconsin voters is that reformist Gov. Scott Walker is likely to win a June 5 recall election.
Other findings have relevance for debates underway here in Michigan, notably one on government employee pension reforms.
The Service Employees International Union will no longer be able to skim dues from Medicaid subsidies that go to home health aides, according to the Detroit Free Press, Midland Daily News, MIRS Capitol Capsule and The Grand Rapids Press.
The SEIU took more than $30 million in dues over the last six years under the scheme. Michigan Attorney General Bill Schuette issued an opinion Friday saying the collection must end.
Bottom line first — a personal note: I believe Rep. Chuck Moss, R-Birmingham, is sincere, and don't think he has "sold out" to the MEA teachers union. People can agree to disagree on down-in-the-weeds interpretations of GASB rules, etc., and time will tell who is correct. However, even if it involves some relatively minor risks, Michigan will be well served if its leaders enact what would arguably be the most transformational fiscal reform since 1996, closing the school pension system to new employees. That would be a real feather in the cap of this Legislature, whereas failure to realize the oh-so-close opportunity would be a black mark — and a victory for the union.
Y = Yes, N = No, X = Not Voting
Senate Bill 1052, Repeal state “beach grooming” regulations and restrictions: Passed 26 to 11 in the Senate
To essentially repeal state regulations mandating a permit for "beach grooming." The restrictions were passed in 2003 during a period of low Great Lakes water levels, when many lakefront property owners and resorts were unable to access or use beaches because of excessive weed growth.
Senior Economist David L. Littmann today writes in Michigan Capitol Confidential that the state’s competitiveness hinges on school employee pension reform and lays out the case why teachers should be in a defined-contribution system.
More information on the issue can be found here.
Today’s Detroit News editorial cites Center research on the transition costs associated with reforming the Michigan Public School Employees’ Retirement System.
James Hohman, assistant director of fiscal policy, addressed the issue in his recent policy brief titled “Five Options for Addressing ‘Transition Costs’ When Closing the MPSERS Pension Plan.”
Andrew Biggs of the American Enterprise Institute has provided some useful context on the source of bogus arguments being used to oppose a pension reform passed by the Michigan Senate last week. The self-serving mischief has caused tremendous confusion in the House, threatening to derail a potentially transformational reform. Biggs’ subject was new research by University of Arkansas economist Robert Costrell, which was cited here.
According to an article on MLive, a budget plan put forth by Gov. Rick Snyder, Senate Majority Leader Randy Richardville, R-Monroe, and House Majority Speaker Jase Bolger, R-Marshall, would double the amount of money being spent on Michigan’s film subsidy program. Spending taxpayer money on millionaire Hollywood movie producers and stars is a bad idea.
Gov. Rick Snyder and former West Virginia Gov. Bob Wise spoke at an online learning panel discussion in Lansing Wednesday hosted by the Mackinac Center. The Grand Rapids Press, MIRS News and Gongwer News Service all covered the event.
Gov. Wise also spoke about the topic Wednesday evening and was joined by Michael Flanagan, superintendent for public instruction, and Dr. William Skilling, superintended of Oxford Community Schools. The Midland Daily News has coverage of it.
When school boards entertain the idea of contracting out to provide a service, school employee unions often warn of the dangers of such actions. They usually claim districts will ultimately fail to save money (being victimized by predatory pricing schemes), will fill schools with uncaring and dangerous “strangers,” and will end providing poorer services.
Richard Antonini, former chairman of the Mackinac Center for Public Policy’s Board of Directors, was inducted into the Junior Achievement West Michigan Business Hall of Fame last night, according to the Michigan Business Review.
Antonini, of Grand Rapids, retired in 2000 as chairman and CEO of Foremost Corporation of America, which merged with Farmers Insurance under his direction. He has served on the Junior Achievement Leadership Circle and the boards of Cornerstone University, Old Kent Financial Corp. and Spectrum Health Foundation.
Thanks to House Republicans, a major school pension reform passed by the state Senate last week could be undone. As reported by CapCon, Senators defied government employee unions by voting to close the chronically underfunded “defined benefit” school pension system to new employees, starting in 2013.
Some Republicans in the Michigan House, among them Appropriations Committee Chairman Rep. Chuck Moss, R-Birmingham, are urging their colleagues to pass legislation that would “prefund” optional health insurance benefits currently provided to retired school employees, who can start collecting these as early as age 46 in some cases.
There is no doubt that Michigan Gov. Rick Snyder has presided over a major expansion of school choice in this state: An artificial cap on the number of brick-and-mortar charter public schools is on a path toward elimination in 2015, and a similar limit on the number of parents who can choose online charter schools for their children is also going up. At the same time, however, these advances look almost modest compared to a nationwide trend of states taking school choice to the next level. The school choice bar is moving rapidly higher.
Former West Virginia Gov. Bob Wise in a Detroit Free Press Op-Ed Sunday extolls the benefits of online learning.
Wise, a Democrat who also served in Congress, will be speaking at an online learning discussion sponsored by the Mackinac Center that starts at 6 p.m. Wednesday at The Lansing Center. He and Gov. Rick Snyder also will participate in a panel discussion on the same topic at noon Wednesday.
