School Board Member: Close Teacher Pension System

System crowding out classroom funding

By Tom Gantert | May 3, 2014

Ann Arbor Public Schools Board Vice President Christine Stead says it's time for schools to move away from the traditional defined benefit pension plan she says is taking money out of the classrooms.

Stead said she'd support a 401(k)-type of retirement benefit plan for school employees as long as it took into consideration that school employees were taking less in pay during their working careers for some type of secure pension in retirement.

Stead said there needs to be a different solution than the Michigan Public School Employees Retirement System (MPSERS).

"We are seeing MPSERS continues to erode our ability to fund the classroom," she said.

Ann Arbor Public Schools paid $17.8 million in pension costs and another $10.3 million in retirement health care costs and the state chipped in another $4.6 million for MPSERS costs in 2012-13.

MPSERS had a $24.3 billion unfunded liability as of Sept. 30, 2012.

State spending on education has become a campaign issue. The state has been increasing expenditures for K-12 education but an underfunded pension system has been eating up many of those dollars, squeezing districts and taxpayers.

"It's encouraging to see school officials recognize the risk that defined benefit pension plans pose to their budgets," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "Let's hope that they can organize around retirement features that provide benefits that are predictable, affordable and current."

Most other state workers in Michigan switched to defined contribution systems in the late 1990s after then-Gov. John Engler signed a bill making the switch. That has helped state taxpayers avoid more than $4.3 billion in unfunded liabilities since then.

Unfunded pension systems have been crowding out government services all over Michigan and the nation.

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Poll: Voters Say Small Business Will Suffer Most With Minimum Wage Increase

Michigan residents also say they will tip less

By Jack Spencer | May 2, 2014

By an overwhelming 75 to 11 percent margin, Michigan voters believe smaller, locally owned and family owned businesses will struggle more under a proposed minimum wage increase than would larger businesses.

The findings are from a poll of 1,460 respondents conducted April 9 by Mitchell Research & Communications. Fourteen percent of those surveyed said they were undecided as to whether small businesses would suffer more than big businesses.

Of those surveyed, 93 percent said they were "definitely" voting this November.

"I think the reactions measured by the poll are pretty intuitive and the results aren't surprising," said Steve Mitchell, of Mitchell Research & Communications. "My sense is that most voters understand that the larger the company, the more it is likely to be able to sustain the impact of this kind of wage increase. Voters also realize it will be the smaller companies, including what might be called the mom and pops that don't have deep pockets, who are most likely to really be hurt by this proposal."

Justin Winslow, vice president of public affairs with the Michigan Restaurant Association, said that for many smaller restaurants the issue won't be just struggling, it will be surviving.

"Those poll numbers look consistent with what we're hearing from members," Winslow said. "Our chain operations look like they'll likely close a good percentage of their smaller restaurants but still exist as restaurant groups. But a lot of independents — smaller guys, our mom and pops — are in real danger of just disappearing altogether under this proposal. They just don't have the ability to absorb such a large increase in their labor costs."

In addition to being asked what kind of restaurants, cafes and other businesses would be most at risk under the wage increase, the respondents also were asked about the proposal's impact on tipping. More than half (54 percent) of those surveyed said they would tip less if the proposal went into effect. More than one in four (26 percent) said they would tip the same if the proposal passed and 18 percent said they would tip more. The remaining 2 percent were undecided.

"It is clear that a lot of people are aware that waiters and waitresses don't earn a large per hour wage and that's why, as customers, they are willing to give larger tips, whether it's 10 percent, 15 percent or more," Mitchell said. "What this poll shows is that if they know a particular employee is making a higher wage, they'll be less willing to tip them as much."

Under a proposed ballot measure for November, Michigan's minimum wage would jump from the current $7.40 an hour to $10.10 an hour. Tipped workers, such as wait staff and bartenders, currently have a base wage of $2.65 an hour, provided their tips take them over the minimum wage. If not, their employer has to make up the difference. The proposed ballot measure would eliminate this distinction and mandate that tipped workers receive a minimum wage of $10.10 an hour, a 280 percent increase that would be phased in over a period of years.

"The minimum wage hike proposal is good politics but bad policy," said F. Vincent Vernuccio, director of labor policy with the Mackinac Center for Public Policy. "But what makes these poll results interesting is that instead of asking the feel good question 'should workers get a raise' it shows that when presented with basic, straightforward questions about effects of the initiative, a solid majority of voters see its negative effects and can figure out who will be hurt by it the most. While on the surface, voting for a wage hike might feel good and may help some politicians, the real world impact will be harmful to the very people the proposal purports to help."

Those surveyed for the poll identified themselves as follows: 38 percent said they were Democratic voters; 36 percent said they were Republican voters; and 19 percent said they were Independents.

Four percent of them identified themselves as being from Detroit; 12 percent from Wayne County outside of Detroit; 12 percent from Oakland County; 9 percent from Macomb County; 12 percent from the Flint, Saginaw, Bay City and the Thumb area; 19 percent from Monroe, Washtenaw, Ingham and Jackson counties; 22 percent from West Michigan; and 11 percent from Northern Michigan and the U.P..

Frank Houston of "Raise Michigan," the group pushing to get the minimum wage increase on the ballot, did not respond to a request for comment.

The poll was commissioned by the Mackinac Center for Public Policy and has a margin of error of +/- 2.56 percent.