Michigan Senate passes bill to reallocate money used for state debt to other projects

On Tuesday, the Senate approved a bill aiming to change spending rules for the state’s school retirement system in a way that would increase taxpayers’s obligations by $1.4 billion. It would do this by letting lawmakers divert savings from pre-funding health care for retired school employees, currently $630 million annually, from paying down pension debt in the school retirement system to other purposes.

Senate Bill 911, introduced by Sen. Kevin Hertel, D-St. Clair Shores, would reduce the required contribution rate the state assesses on school districts. To prefund pension benefits and pay off pension debts, the state charges districts based on their payroll. The bill would reduce the rate assessed from 20.96% of payroll to 15.22%.

The bill passed the Senate Sept. 17 on a 20-16 party-line vote, with Democrats voting yes and Republicans voting no. Two Republican senators did not vote. The bill will be sent to the House for concurrence on Sept. 25.

If the $630 million is not applied to the underfunded teacher pension debt, taxpayers will have to pay another $1.4 billion in taxes over 14 years. That span covers the current trajectory required to fully fund the Michigan Public Schools Employees Retirement System, according to the Reason Foundation.

Hertel did not respond to an email seeking comment.

“The state accidentally made teachers its biggest creditor when it underfunded pension benefits,” said James Hohman, director of fiscal policy at the Mackinac Center. “This is unfair to teachers and taxpayers alike, and this bill further defers paying down pension debts.”

Redirecting the money would help districts, say the bill’s supporters. Funds could be used in other ways. Sen. Dayna Polehanki, who chairs the Senate Education Committee, wrote on social media, ”The passage of Senate Bill 911 today will permanently redirect $600 million from MPSERS back to schools!” MPSERS is the retirement system for school employees.

The change would permanently “steal from the teacher pension fund,” Sen. Aric Nesbitt, R-Porter Township, posted on social media.