News Story

Multiple School Districts Breaking the Law On Transparency

Schools are required to post contracts, compensation information online

Teachers in the Pontiac School District approved a contract with their school board in May 2012. 

Ten months later, the district still has only the 2007-2011 contract posted on its website.

In the Ann Arbor Public Schools in Washtenaw County, the district has 2011 salary information, including that of a superintendent who left in 2010 posted on its website.

Ann Arbor Public Schools Spokeswoman Liz Margolis called that an "oversight." The district now has its fiscal year 2012-13 approved budget on the website. (Update: Ann Arbor has now posted its 2012 salary information).

This week is Sunshine Week, which is designated to raise awareness of openness in government. However, numerous school districts are breaking a law that took effect Oct. 19, 2009, that said districts were supposed to post certain financial data on their websites. There is no penalty for non-compliance.

Schools were slow to follow the law when it was first enacted. According to the state of Michigan, about a year after the law went into effect only 23 percent of districts were in compliance.

Inkster Public Schools in Wayne County had no transparency icon on its website and was missing most of the required financial information until it was contacted by a reporter. Within a day after being contacted, the district updated its website to include much of the missing information.

"Please understand that our district has undergone a tremendous amount of cuts, consolidation and transitions," Inkster Public Schools Superintendent Mischa Bashir wrote in an email. "(That's) not an excuse, just an oversight in updates to the system."

Pontiac School Board President Carol Turpin didn't reply to an email seeking comment.

Numerous other districts around the state have not updated teachers' contracts or salaries.

"They are acting illegally in the middle of Sunshine Week by making it difficult for people to find school finances," said Patrick Wright, senior legal analyst at the Mackinac Center for Public Policy. "And school finances make up a significant portion of school funding."

The statute states that a district has 30 days after the school board adopts its operating budget to update the information.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

Teacher Pension System Hole Getting Deeper

State falls $290 million short on school pension funding in 2012 after GOP left old system largely in place

For the eighth time in the past 10 years, the state of Michigan has failed to meet the "annual required contribution" level estimated to catch up on unfunded school employee pension promises.

Due to years of failing to fully pay this contribution, the Michigan Public School Employees' Retirement System (MPSERS) now is underfunded by $22.4 billion. The contribution for 2012 should have been $1.74 billion. However, the state invested $1.45 billion, resulting in a $290 million shortfall.

Last year, the Legislature and Gov. Rick Snyder had an opportunity to switch new education employees over to a defined contribution, 401(k)-style system. This is the type of system used virtually everywhere outside of government as well as for all other state employees in Michigan.

Sen. Mark Jansen, R-Grand Rapids and Sen. Phil Pavlov, R-St Clair, led the charge to make the change. They were successful in the Senate, but the Snyder administration and some key members in the House argued that the change couldn't be made, largely because of transition costs.

Analysts at the Mackinac Center for Public Policy have maintained that the so-called transition costs are primarily illusionary.

After being debated throughout the summer of 2012, reforms to MPSERS were passed that did not include the defined contribution switch over.

The Snyder administration said in time, the shortfalls should not occur.

"Act 300 of 2012 significantly reduced the employer cost of the plan, and therefore future contributions. Pension liability was reduced by approximately $1.6 billion, and health care liability was reduced by approximately $14 billion," said Kurt Weiss, a spokesman for the governor. "These savings, combined with an employer rate cap on the unfunded liability portion of the contribution rate, will reduce volatility and help ensure that the retirement system will receive its required contributions. As the overall school payroll stabilizes or increases, the contributions received by the retirement system will more closely match the expected required contributions.

"Act 464 of 2012 also ensures that retirement payments will be made on behalf of retirees returning to work," Weiss added. "These two pieces of legislation will have the effect of stabilizing the employer contribution rate."

Weiss also said that Michigan's improving economy would help the retirement system recover its funding deficits through investment returns.

"In fiscal year 2012, the retirement system achieved a double-digit return on investments," Weiss said. "This helps counteract the severe investment losses of 2008 and 2009, which were the two worst investment years in plan history."

Sen. Pavlov, however, said he has his doubts about long-term prospects for the system.

"The intent of the legislation was to provide protection for the retirees as well as the taxpayers of the state, but I have concerns regarding the overly optimistic assumptions on payroll growth and market returns," Sen. Pavlov said. "The massive unfunded liability will continue to accumulate in the system if we fail to meet those expectations."

Weiss said state employees can switch to defined contribution plan, but added that a study done in November recommended that the current system be retained.

The Segal Co. study has been criticized by some for assuming that the state would continue fully funding the defined benefit plan — something it has repeatedly not done.

Sen. Pavlov said he doesn't think defined benefit systems are viable.

"Reforming a retirement system with hundreds of thousands of members and billions of dollars in debt has proven to be a difficult assignment," Sen. Pavlov said. "My concern has always been centered on protecting the benefit that members have worked a lifetime to earn. The reality we all must recognize is that defined benefit retirement systems are no longer viable in the public sector but the political will to make that change is hard to come by."

Former House Appropriations Committee Chair Chuck Moss, who helped lead the charge to avoid changing to a defined contribution plan, couldn't be reached for comment.

Rep. Jeff Farrington, R-Utica, was a member of the work group that examined the MPSERS issue last year. He supported the position that a switch over to a defined contribution system shouldn't be made immediately.

"I'm concerned about the (Segal) report and will be seeking input from the administration to find out what's actually happening and how we can address it," Rep. Farrington said, upon being informed about the $290 million shortfall in the 2012 contribution.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.