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Articles from the AFT Michigan Forum
Volume 66 No. 3, Spring 2007
In Memorium: Evelyn Zeidman
The AFT Michigan Retiree Network was saddened to learn of the passing of a founding member of the committee, Ms. Evelyn Zeidman. Evelyn passed away on January 22, 2007. She was a retired educator from the Lake Shore Federation, active with the Retiree Network, a twenty-year member of Citizens for Better Schools, a human rights activist and a strong Democrat actively working to elect candidates that cared about public education, health care and peace. She will be missed.Pensions and Charter Schools
By John Olekszyk
AFT MI Retiree Network Chair
As the Governor and the State Legislature began their "debate" for solving the financial crisis facing the state, school employee pensions have again become a subject for discussion. The shortfall in terms of state aid for schools and the general operating budget has provided school employee critics a golden opportunity to reduce and/or eliminate some of the alleged "Cadillac" provisions of our pension and health care system.
School pension critics have already coined a new phrase in their plan to attack our benefits. They say that the school pension and health care plan should be "comparable to the private sector plans." This means that the Graded Premium plan for insurance costs will again be advanced. A switch to a Defined Contribution Plan will be given a long hard look. The MPSERS Board will undoubtedly raise co-pays and deductibles again and may even consider reducing some aspects of our health care coverage.
While the debate rages over the proposals above, it behooves all of the parties involved to be a little creative and consider some other solutions to the pension and health care concerns.
As one of the parties involved, I have a proposal that could address a part of the problem.
The state currently requires all public schools to contribute a little over 17% of their payroll to MPSERS to provide for pension and health care costs. Most teachers are also required to contribute another 4% of their pay to the system. Part of the State Aid Foundation Allowance of just more than $7,800 per student is used to pay that pension contribution.
Public School Academies (PSAs) or Charter Schools all receive the same $7,800 of foundation allowance as public schools but they are not required to pay the 17% of salary into MPSERS because their employees are not covered by the state pension system. It wouldn't be fair to call this 17% an extra "profit margin" for PSAs, but I will.
For those of you who are not mathematically inclined you may want to skip the next three paragraphs.
The current student enrollment in the 239 PSA's in Michigan is approximately 90,000 students and that number is growing each year. If you multiply the number of students by $7,800, you get $702,000,000.00.
Assuming that state aid is their only revenue, and if we use the normal standard that wages and salary are about 65% of a school's operating budget, PSA's should be paying about $456,300,000 in teacher, administrator, and other support personnel wages.
The 17% that they do not pay into the pension system represents a $77,571,000 bonus to the PSAs.
PSAs are required to observe all of the same academic, program, and regulatory rules that apply to public schools (although oversight to make sure they do is almost non-existent), so it doesn't seem fair that this kind of financial bonus should accrue to the PSAs. The current system also fails to provide PSA employees with any kind of pension. I am not sure how many PSAs provide 401K plans with any amount of matching funds to their employees.
My proposal is fairly simple. Require PSA's to become part of MPSERS, which would provide the plan with an additional $77M or more a year without an immediate cost to the system because it would take 10 years for the employees to become vested. The actuaries would have to compute the eventual cost based on the life expectancy of PSAs and the staff turnover ratios.
If the PSA's don't like that plan, and I am sure that they won't, the state should reduce the 17% subsidy that they have been providing to them and use that money to address school funding shortfalls. They might even want to think about contributing some or all of the $77M to the pension system to help offset rising health care costs.
If PSAs are to continue to operate in Michigan with the full funding of the state they should be at least be required to fund a pension system, and if they do not wish to do that, then that portion of their funding should be eliminated.
The opinion expressed in this column does not reflect the policy or position of AFT Michigan but rather that of the author.