State’s Largest Teachers Union Offloads Some Pension Obligations Onto Taxpayers

Faced with skyrocketing financial liabilities, the Michigan Education Association has discovered a way to shift some of the burden of providing pensions for its top executives to taxpayers. Moreover, it’s a pension-spiking scheme that has been approved by both the state Legislature and some elected local school boards.

The state’s largest teachers union has seen the unfunded liability in a pension system it runs for its own employees grow from $120.7 million in 2010 to $130.3 million in 2016.

It would probably be more if the MEA had not worked out a scheme with some school districts that allows some of its top executives – including the current president and three of her predecessors — to retain their status as public school employees, even while doing full-time union work. This has allowed these union officials to continue to accrue pension credits with Michigan’s public school retirement system, meaning they get larger government pension payouts when they retire.

The MEA reimburses the school districts that employed these officials for the contributions made on their behalf to the state-run system. But persistent underfunding of the state system has meant that the school districts’ contributions and the union’s reimbursements for them were inadequate, placing taxpayers on the hook for the shortfall.

As of 2016, the Michigan Public School Employees Retirement System was $29.1 billion short of the amount its own actuaries say it should have to pay retiree benefits. For many years, state officials have failed to contribute the amounts needed for the system to cover its obligation to provide the pension benefits owed to school employees. This year, state taxpayers are paying $2 billion just to make up for the past underfunding.

The unfunded liability in the MEA’s own retirement system suggests a similar pattern of underfunding. In its annual audit, the MEA said it provides a defined benefit pension plan to virtually all of its employees. The MEA also offers a 401(k)-type plan but doesn’t match employee contributions.

The MEA didn’t respond to emails seeking comment.