Hartland Consolidated Schools has negotiated into its union contract a clause stating teachers will have to “give back” salary if the school’s funding drops.

Under Gov. Rick Snyder’s proposed school plan, Hartland’s per-pupil funding would go from $7,426 this year to $6,956 in 2011-12. That would be a 6 percent cut and would translate to a 3.6 percent reduction in salary for teachers. But those teachers would still be eligible for automatic yearly raises of 5 percent if they had under 11 years of service.

“The automatic give-back or concession is unique for a teachers’ union contract in Michigan and is beneficial for many reasons,” wrote Michael Van Beek, the Mackinac Center for Public Policy’s education policy director. “The most important benefit is that it enables Hartland to reduce employee costs when necessary without having to renegotiate a brand new contract, a process that unions generally delay as long as possible, especially when it’s likely to be concessionary.”

Hartland has taken some steps to reduce its costs beyond teachers’ salaries.

Five years ago, the school privatized its custodians and has saved a total of about $4 million, according to Superintendent Janet Sifferman.

But there are other areas where the district will see increasing expenses in teachers’ salaries and health care costs.

The teachers’ contract also calls for yearly automatic raises of 5 percent for teachers with 11 years or less experience.

Sifferman said those “step increases” are “very hard” to negotiate out of contracts.

“In fairness to the teachers, in other industries, there are other ways of working your way up the ladder, different job opportunities — you don’t have those opportunities in teaching,” she said.

The district also pays for 100 percent of the teachers’ health care premiums.

Sifferman said the health care cost for the district is $5.5 million a year, compared to $28 million for payroll.

Van Beek said districts can’t afford to pass up any opportunity for cost-sharing with employees.

“Nibbling around the edges isn’t going to get districts where they need to be financially,” Van Beek wrote in an email. “They can squeeze a lot of savings out of consolidating, streamlining and contracting out services, but until they deal with rising labor costs, districts aren’t going to be able to get their fiscal houses in order.”

As gasoline prices trend north of $4 per gallon, a new study released by an oil industry lobbying firm asserts that Michigan’s stressed public pension plans are some of the biggest beneficiaries of investments in oil and natural gas companies. The study says that between 2005 and 2009, oil and gas investments represented 4.8 percent of total state government pension fund assets, yet produced 12.2 percent of the investment gains earned by those plans.

The study looks at the Michigan Public School Employees' Retirement System (MPSERS) and the Michigan State Employees' Retirement System (MSERS). Together they have unfunded liabilities totaling about $15 billion.

The state employee pension system was closed off to most new hires in 1997. Most state employees hired since then were put on a modern 401(k)-style retirement plan similar to what many private-sector employees have. This has limited the growth of the MSERS liability, which accounts for $3.13 billion of the total $15 billion unfunded liability.

The school employee pension system accounts for $11.98 billion of the unfunded liability. All public school employees are still granted conventional defined-benefit pensions.

An unfunded pension liability means that if the system shut down today, the state does not currently have the $11.98 billion necessary to meet all of the outstanding obligations for the MPSERS pension benefits. To place this in context, the current state government budget is about $47 billion.

The new oil industry report states that these two state government pension plans had $2.5 billion invested in oil and natural gas companies, out of a combined $52.8 billion in total assets.

“You want to know who owns these companies?” asked John Griffin, a spokesman for the American Petroleum Institute. “It’s not the fat cats. … Basically, we are working for retirees.”

As of September 2009, Michigan's employee retirement systems had two big oil companies in the top-15 equity investments. Apple, Inc. was the No. 1 investment, with a market value of $423 million. Exxon-Mobil Corp was No. 8 at $214 million and Chevron Crop was No. 12 at $186 million.

“Every dollar that grows in these investments is a dollar taxpayers don’t have to fork over to these underfunded pension systems,” said James Hohman, a fiscal policy analyst for the Mackinac Center for Public Policy. “We want to have a high return, and that means taxpayers aren’t on the hook for these pension payments.”

The state of Michigan paid about $1 billion in 2010 to catch up on these unfunded liabilities.

The study was done by Robert Shapiro, chairman and co-founder of Sonecon LLC, and Nam Pham, managing partner of NDP Group LLC.

Note: The unfunded liabilities cited above refer only to constitutionally mandated "accrued benefits," and not retiree health insurance benefits authorized by state statute, which may be amended.