News Story

Where $100 Million Buys Little: Michigan School Employee Pension Fund

Teacher pension system gobbles up 30 percent of payroll

If you’re looking to save money, making extra payments on your mortgage can be a painless way to do it. Just an extra $1,000 each year, for example, could save tens of thousands of dollars over the life of the loan.

Now, imagine “paying the mortgage” for the Michigan Public School Employees Retirement System. The pension liability (just the debt) of this program is so big and will require so many years to pay it off, it is easier to think of it in terms of a mortgage.

Just like a mortgage, the state has a payment schedule to pay off the debt in a given period of time. To evaluate the health of a pension system, we look at the present value employees have earned to date and what the state has set aside to meet this obligation. When these two numbers match, the state has set enough money aside to pay what employees have earned. In the case of MPSERS, however, the system only has roughly 60 cents saved for every dollar earned.

In a report this summer, the Michigan Senate Fiscal Agency notes that an “extra" payment of $108 million was included in the budget for fiscal year 2014-15. While $108 million is a sizable sum, it barely makes a dent. The accrued liability for MPSERS, the amount taxpayers have to pay just to catch up, is $25.8 billion. Naturally, the pension system represents a huge issue when $108 million fixes only about 0.4 percent of the problem.

Paying down this unfunded liability crowds out spending on essential government services and investments, including education. Imagine if the state had an extra $108 million to hire new teachers. If you divide that payment by $100,000, roughly the amount for a teacher’s salary and benefits, it could mean 1,000 new teachers.

When you fail to make mortgage payments, you risk losing your house. Maybe if politicians viewed taxpayers more like banks, they’d be less inclined to make promises they don’t keep. Instead of scrounging around for extra payments on a large funding gap, lawmakers would do better to close MPSERS to new hires and make a defined-contribution plan mandatory for all future school employees.

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, points out that MPSERS is costing schools nearly 30 percent of payroll. Compare that to the private sector, where retirement benefits cost 5 to 7 percent of payroll. Hohman says tinkering with contributions does little to make the system predictable or affordable.

Current legislators should be applauded for doing something. But bigger changes are needed. In a defined-contribution plan, government would be forced to place those retirement payments immediately into an account that was owned by the employee. Employees and taxpayers would no longer have to cross their fingers that retirement funds will be there in the future.

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.

Commentary

The Story of a True Hero Spreads

Sir Nicholas Winton Feted by Holocaust Memorial Center

Last night I shook hands with the son of one of my favorite heroes. The Holocaust Memorial Center in metro Detroit hosted Nick Winton, who gave a most inspiring presentation on the life of his father, Sir Nicholas Winton.

Sir Nicholas, who prefers to be called Nicky, was a 29-year-old London stockbroker who gave up a skiing holiday to visit Prague and witness firsthand the refugees who were fleeing Nazi tyranny. That visit led to his heroic deeds which enabled 669 children to escape.

Parents, desperate to save their children, sought his assistance and he established an organization to aid them. He worked for weeks to find homes for them and also to arrange safe passage to Britain. For years no one knew of Nicky’s efforts for these many children. An episode of the BBC television program “That’s Life!” aired in 1988 and many of the children met for the first time this humble, beautiful man who had saved their lives. A clip from that program was shown to the captivated audience last night as the son explained the profound effect on him to see his father wipe away tears when he met with his “other” children.

The trains left Prague and saved 669 souls, until Sept. 1, 1939, when the largest group of 250 children was scheduled to leave. Of course, on that day Hitler invaded Poland and the war had begun. Most of those lives, along with most of the families of the 669, were lost. Because of the determined effort of Nicky Winton and those who assisted him there were 669 saved. These “children” and their descendants number in the thousands and they have made their mark on the world in many different walks of life. The beautiful part of this story is that many have befriended Nicky and his family.      

Honored guests at the Holocaust Memorial Center were several of the children saved in the Kindertransport efforts. Certainly many of the other guests were children of children saved. How thrilling it must have been for them to hear this story related.

It was thrilling for my daughter and me as well. We have been privileged and humbled to have met Sir Nicholas. He lives in Maidenhead (25 miles from London) and is now a spry 105 years of age. We have been guests in his home and have lunched with him at his favorite Maidenhead pub. When you leave his presence you feel you have left a true hero. He says he is NOT a hero but only a man who did what needed to be done. His motto, “If it’s not impossible then there must be a way to do it” served him and the 669 children he saved well.

The Mackinac Center first learned of Nicky when then-President Lawrence W. Reed met and interviewed him. For more of this remarkable story please read “The Difference One Can Make.”

The documentary, “Nicholas Winton: The Power of Good,” tells more of this incredible man and more recently, “Nicky’s Family” was recently released. Both are produced by writer-director Matej Minac and are narrated by Joe Schlesinger of CBC fame. He, too, has a personal view of Nicky and his goodness. Yes, he was one of the saved children. Nick Winton mentioned that he visited Joe in Toronto as he made his way to the Holocaust Memorial Center for his presentation.

A new book written by Nicky’s daughter, Barbara Winton, “If It’s Not Impossible…..The Life of Sir Nicholas Winton,” tells more of the remarkable story.

The Holocaust Memorial Center plays an important role in educating the public on the horrors of tyranny, but also on the ways people held themselves accountable and assisted those in need. School groups from all over Michigan are hosted each year so the children of this new generation become aware of the history of the Holocaust. I offer a sincere thank you to the Memorial Center for an inspiring evening and to Nick Winton who represents his father, and his story, so very well.

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.