The Michigan Education Association was the fourth wealthiest union among its peers under the National Education Association umbrella and the MEA’s employee payroll was third-highest in the country as of 2009-10, according to a union watchdog organization.

Despite a 0.9 percent drop in total income in 2009-10 from the previous year, the MEA still brought in $77.4 million in 2009-10, the fourth-highest in the country among the 53 NEA affiliates. Only California at $186.2 million, New York at $128.8 million, and New Jersey with $120.5 million brought in more money.

The MEA brought in $623.90 per member it represents, making it the 3rd highest in the country among K-12 NEA union affiliates. Only Indiana with $796.60 and New Jersey with $674.52 had more money per member.

Total compensation for MEA employees, $68.5 million, was also third-highest in the country among NEA affiliates.

Mike Antonucci of the of the Education Intelligence Agency, a research firm in California that reports on public school union activities, found that 18 state affiliates of the National Education Association lost money in 2009-10.

MEA spokesman Doug Pratt didn’t respond to a request for comment.

Despite being one of the most lucrative unions in the NEA, the MEA suffered one of its worst years politically last year. Some MEA members have questioned their union’s effectiveness. Last September, Grand Ledge teacher and former local union president John Ellsworth questioned how effective the MEA had been. 

Ellsworth also noted news reports of MEA officials getting hefty raises during a period when he said many teachers were facing cut backs.

For example, then-MEA President Iris Salters’ total compensation in 2010 was $414,443, with a base salary of $280,598. Salters got a 10.1 percent raise in base salary from 2009, when she made $254,762. Salters’ 2010 total compensation was a 17.7 percent increase from 2009, when her total compensation was $352,020.

“Why not take the money and run?” Ellsworth said. “… There are a lot of people upset they are sending their money to East Lansing (MEA headquarters) and not getting a whole lot for it.”

Significant reform — over the objections of the MEA — occurred in Michigan last year. Several legislative changes have taken place since Gov. Rick Snyder took office. Government employees, including teachers, now have to pay 20 percent of their health insurance costs and tenure reform prohibits districts from using seniority as criteria for layoffs and recall. The tenure rule changes also make it easier to fire ineffective teachers. An artificial cap on the number of charter public schools also has been lifted.

In retaliation for leading the reform efforts, the MEA supported the recall of Rep. Paul Scott, R-Grand Blanc, in November. But Republican Joe Graves won the special election to replace Scott.

After the Michigan House and Senate passed a bill that stops K-12 school districts from automatically taking dues out of employees’ paychecks, AFT Michigan President David Hecker wrote March 7 on a Facebook post: “In part, today was the most depressing day I have ever spent as a 36 year member of the labor movement.”

Jack McHugh, the Mackinac Center for Public Policy’s senior legislative analyst, said the past year was a defeat for the MEA, but that the union’s win-loss record is about 30-1.

“Government unions are responsible for government and school employees here collecting annual benefits worth $5.7 billion more than their neighbors who work in the private sector," McHugh wrote in an email. "Until last year, the MEA had choked charter school expansion for almost 20 years, despite waiting lists with tens of thousands of students begging to escape unionized conventional schools where no learning takes place. Ditto for halting teacher tenure reform, which has made it almost impossible to fire even felonious teachers. Of course fiscal reality eventually catches up with school districts like Highland Park, Muskegon Heights and Detroit, which are driven by union-sponsored fiscal abuse into virtual states of bankruptcy. Those fiscal realities were the main driver for relatively modest reforms enacted last year (that came) in the face of intense union demagoguery and opposition including a successful recall targeting one of the reformers. Still, the union has had a remarkable run of success — never mind the fiscal carnage their success has wreaked on taxpayers and institutions.”

For Immediate Release
Monday, March 12, 2012
Contact: James M. Hohman
Assistant Director of Fiscal Policy
or 
Michael D. Jahr 
Vice President for Communications
989-631-0900

MIDLAND — In an 18-page study released today, Mackinac Center Assistant Director of Fiscal Policy James M. Hohman reviews ways that state policymakers can address the question of the “transition costs” in closing the pension plan in the Michigan Public School Employees’ Retirement System. Closing the plan to new members has become increasingly urgent due to its mushrooming unfunded liabilities, which have reached a whopping $17.6 billion. Several state agencies, however, including the Michigan Office of Retirement Services, have calculated that closing the plan could cost $360 million in the first year, despite saving money in the long run.

Hohman questions the way these “transition costs” have been viewed, but observes that there are numerous ways to address them if they are seen as barriers to reform. “First of all,” Hohman notes, “the state could reduce public school employees’ generous retirement medical benefits. Offering these is not constitutionally mandated, while paying pension obligations is. Retiree medical benefits, which are provided in addition to Medicare, are uncommon in Michigan’s private sector, and state government employers spent $795 million on them in fiscal 2011 alone. A modest reduction would ameliorate so-called transition costs, especially since the largest transition costs decline and become savings in subsequent years.”

Alternatively, or in conjunction, Hohman suggests state policymakers consider both closing and “freezing” the school employee pension plan. Closing the plan to new members would mean future public school hires would receive a 401(k)-style individual retirement savings account with employer matching deposits; freezing the plan would shift current employees to a 401(k)-style plan, too. “Current employees would still receive the pensions they have earned to date,” Hohman observes, “but because they would no longer earn new pension benefits, the potential for unfunded pension liabilities would be contained even further than if the plan were simply closed. This containment would improve the return on any upfront costs, and it could lower them, since the accounting standards driving transition cost calculations may be more flexible for a closed and frozen plan.”

Hohman writes that the state’s next-best option would be to simply pay any upfront transitional cost, since much of that payment would accelerate the reduction of the pension plan’s unfunded liabilities. “The plan’s unfunded liabilities have risen by more than 6,500 percent since fiscal 2000,” he notes. “The state has gotten badly behind, and the difference has to be made up at some point. One of the penalties for that is forgoing other legislative spending.”

Nevertheless, Hohman questions the current perception of the so-called transition costs. “The state agencies’ calculations are useful information, but they are only part of the picture,” says Hohman. “The agencies’ calculations of the largest upfront costs are based on a reading of Governmental Accounting Standards Board guidelines. GASB rules, however, dictate only how to track and measure payment decisions, not which payment policies to adopt. This means legislators will incur ‘transition costs’ only if they choose to.”

Hohman also discusses two other technical options: simply structuring a different, backloaded amortization payment schedule while tracking the figures using GASB guidelines, or spreading the amortization payments across the entire public school employee payroll, which would technically allow the state to avoid upfront costs by adopting a different amortization schedule. These options would allow legislators to transition to a 401(k)-style system while applying policies the state already uses in other areas.

Hohman’s study, titled “Five Options for Addressing ‘Transition Costs’ When Closing the MPSERS Pension Plan,” is available at www.mackinac.org/16589.

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