How Steve Cook's Pension Will Cost Taxpayers

Although his real employer is a private organization – the Michigan Education Association – Steve Cook continues to be considered a Lansing public school employee for purposes of “spiking” his eventual payout from the state-run school pension system.

The MEA is the state's largest teachers union, and Cook, its president, will eventually receive pension benefits that are based on his six-figure union salary rather than the modest pay he received years ago while employed as a classroom paraprofessional.

Defenders of the deal argue that taxpayers shouldn’t be concerned because the MEA reimburses the school district for the money it contributes to the pension fund on Cook’s behalf.

Yet taxpayers will be paying for Cook’s pension in two ways.

First, in addition to the pension contributions the school district makes (whether reimbursed by a union or not), the state is now directly paying more than a quarter of the system’s annual costs. So Michigan taxpayers are already covering part of the current costs of Cook's pension.

Second, taxpayers are also at risk for any future costs that Cook’s benefits incur, due to chronic underfunding of the school pension system. State actuaries estimate that school employees are promised $63.8 billion worth of pension benefits, but just $38.0 billion has been set aside to pay for these. In fact, the system has only been fully funded in one of the past 30 years.

Current pension fund contributions are determined on the basis of aggregate rather than individual payroll numbers, so there is no precise calculation of how much a particular employee costs the pension system. And only in the fullness of time can it ever be known how much one employee’s benefits contribute to the system-wide underfunding.

The bottom line probably won’t surprise anyone, though: Taxpayers are and will get socked for a share of union president Steve Cook’s special pension deal.