Michigan School Retirement Deficits Eat District Budgets – Michigan Capitol Confidential

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Lansing schools’ pension spending on the rise despite reduced enrollment and enrollment thanks to state underfunding

Michigan’s state-run public school pension system promises traditional retirement benefits in the form of annual pensions to employees hired before February 2016. Most new hires receive employer contributions to payroll accounts. 401 (k) type retirement savings.

Meanwhile, enrollment in public schools statewide has declined, meaning that in many districts there are fewer teachers and support staff on the payroll than years ago. previous ones. But as many school districts are learning, fewer employees doesn’t translate into lower spending for retirement benefits.

The Lansing School District illustrates this point.

Although headcount and headcount have declined significantly, the cost of unfunded pension obligations owed to employees hired before February 2016 is increasing.

“Pension debt hurts both teachers and taxpayers,” says James Hohman of the Mackinac Center for Public Policy. “It drains the resources of today’s classrooms to pay off yesterday’s service debts. While lawmakers have done a lot to stop future pension debt, they’ve also fallen into the red before they do, and districts are paying the price. “

The Lansing School District employs fewer people because it also accommodates fewer students: 10,498 in 2020, down 22% from 13,465 enrolled in 2011. The number of employees also fell, from 1 537 full-time positions in 2011 to 1,226 in 2020, a decrease of 20%.

But even with a smaller payroll, the district’s required annual contributions to the state-run pension system increased from $ 17.3 million in 2011 to $ 21.1 million in 2020, an increase of 22. %. The increase came even though, since February 2016, no new hires have been entered into the old defined benefit pension system which is responsible for the surge in spending funded by state taxpayers.

Lansing’s cumulative debt to Michigan’s public school employee retirement system has also increased. In 2014, its share of government pension obligations was $ 197,731,925. By 2019, it had risen to $ 235,804,289, an increase of 19%.

Why? State leaders and pension managers have failed for decades to properly fund the post-retirement benefit promises promised by the school pension system. Underfunding ultimately led lawmakers to shut the system down to new hires from 2016, but the financial hole driven by years of inability to contribute enough to cover benefit promises – which still happen – remains and remains. ‘further aggravates.

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