Skyrocketing Pension Costs Trigger Parent Angst Over Loss of Teachers

At a recent event related to the Grand Ledge school district, teachers and parents expressed concern over the loss of departure of some teachers. A TV station report on the meeting said the district is losing 19 teachers, 12 to retirement.

Yet most attendees were unaware that just the increase in the district's costs for the school employee pension system over the past five years could have paid the salaries of about 140 new teachers (not including benefits). To put this context, state figures show that Grand Ledge had 280 teachers in 2013-14.

The Grand Ledge school district shares a challenge with many others in Michigan: It is getting more state dollars but not “feeling” the increase because dollars are being sucked away by the skyrocketing costs of the state-run school pension system.

In June of 2010, the district paid $4.2 million into the pension system. For 2015-16, the district has budgeted $9.2 million for those costs – an increase of $5 million.

“It is significant,” said Grand Ledge Superintendent Brian Metcalf. “It has significantly impacted what we have been able to do in regards to employees. All across the state, districts are dealing with these tough numbers.”

James Hohman, the Mackinac Center for Public Policy's assistant director of fiscal policy, has done extensive research on the Michigan school pension system, and recommends closing it to new employees, who would instead get contributions to tax-deferred personal savings accounts. He argues that partial reform measures enacted by recent legislatures have not addressed the core of the problem, which is persistent underfunding that has gone on for decades.

Metcalf agreed that what the state has done so far hasn’t worked.

“What we have done so far with policy has created a crisis in our pension system,” Metcalf said.

The TV station covering the event reported “a loss of funds in the district over the years has posed some challenges.”

WLNS-TV is one of many news outlets erroneously reporting that school districts are getting less money from the state.

Total state funding for Grand Ledge increased by almost $4 million between the 2010-11 and the 2015-16 school years, over which time the district added 27 students. It received $30.38 million in 2010-11, when 5,069 students were enrolled. In 2014-15, the district got $34.32 million for 5,096 students.

While total state funding went up, the district’s foundation allowance had decreased from $7,426 per student in 2010-11 to $7,126 in 2014-15. The foundation allowance is what the state gives a district to cover operational costs. It doesn’t include what the state gives a district for costs such as special education or employee pensions.

It’s not uncommon for a district to get millions of extra dollars from the state because of the growing costs of employee pensions, but get less or the same in foundation allowance money. The foundation allowance historically has been anywhere from 70 to 85 percent of the total amount of money a district receives from the state.