Teacher Pension Legislation Draws Skepticism from Dearborn Public Schools
Senate Bill 1040 re-envisions how school employee pensions work, but would too much of the burden be pushed onto teachers?
Photos
Officials from both the Dearborn Public Schools district and its largest union, the 1,270-member Dearborn Federation of Teachers, had plenty to say about Senate Bill 1040, which would reduce the amount of money the state’s public schools pay for teacher pensions, and shifts those costs to teachers.
The bill, which is sponsored by State Sen. Roger Kahn (R-Saginaw County) is still being debated in the state senate, but in Dearborn, discussion about the potential for the bill to become law has already commenced.
If approved, the law could save the district $3.6 million that would have been paid into the state’s teacher retirement system.
“It would save the schools money; so it would be good for schools,” said DPS Supt. Brian Whiston. “But we have to be mindful of how this will affect our teachers.”
The cost of funding retirements for all districts has been an expensive proposition in a time of continual deficits and funding losses. Whiston said the bill’s passage would cut by about three percent the district’s contribution to teacher pensions. Currently, the district pays 24.46 percent into the pension fund, and Oct. 1, 2012, that amount would increase to 27.37 percent, if the bill does not pass.
However, the bill also puts into place provisions that would put pressure on teachers to make up the difference. Under the bill, teachers who declined to pay for the increase would need to freeze their defined benefit pension and shift to a 401(k) plan.
Active and retired employees would see their health benefits capped, which would mean higher premiums paid by employees. Teachers hired after July 1 would see retirement health benefits disappear in favor of an employer-matched plan.
DFT President Chris Sipperly said the potential changes are the latest round in a protracted battle between public school employees and the Michigan Legislature.
“This would increase the cost of insurance for all retirees and active employees, and we’ve already taken numerous hits,” she said. “I absolutely believe that this is political–and I’m worried about the effect this will have on school employees, and whether people are going to want to go into this line of work under these circumstances.”
Bob Cipriano, the director of business services for Dearborn Schools, said the savings would be significant for the schools.
“We have about $120 million in funded costs,” he said. “Every 1 percent we don’t have to pay to the pension fund helps us–that’s how we arrived at the $3.6 million figure.”
Ken Silfven, a spokesman for Gov. Rick Snyder, said he could not speculate on whether the governor would sign the bill because it’s in committee. However, he said the bill seems like a step the governor would agree with.
“We are happy to assist the legislature in reforms to programs that help taxpayers,” he said. “It’s a step in the right direction.”
John Olekszyk, President of the Coalition for a Secure Retirement, said the new provisions would hit retirees and older people who planned their entire lives around their pensions.
“Michigan seniors have already been hit by a new tax on their pensions,” he said. “Now legislators want to increase what retirees pay for their health insurance, which they should have funded all along.”
“When legislators recently modified state employees’ pension benefits, at least they spared people who have already retired and are living on fixed incomes,” added Olekszyk, who retired as a teacher from the Roseville School District in 2000.
It’s been a rough road for teachers in Michigan, and it’s no different in Dearborn.
In terms of compensation, district teachers accepted 6 to 7 percent in wage cuts for the life of its 3-year collective bargaining agreement. Also, employees who elected to participate in the district’s Preferred Provider Organization insurance plan agreed to pay a $218 per month premium. The union also agreed to administer its own health care plan, which helped the schools pare $22 million from its budget.
The 1,100 member Dearborn Federation of School Employees also inked a 5-year contract that included 5.4 percent in wage reductions unless state per-pupil funding is increased. But wages can also be reduced for the final three years of the contract in an amount not to exceed the 2.1 percent if state funding is decreased.
Bruce Koldys
11:27 am on Monday, April 2, 2012
Just a couple of years ago it was "decided" that the pension system needed a fix, so they mandated 3 percent employee contribution. Now these same people that "decided" that the pension system needed a fix have now discovered that it needs another fix, just a couple years later and with the original contribution issue still in the courts. This is just a case of Republican majority in the state "making hay while the sun shines". Either that or they were simply stupid or intentionally dishonest when they told us that the 3 percent was a "fix"
Dearborn Taxpayer
12:20 pm on Monday, April 2, 2012
This is the issue with "Defined Benefit" pension plans and post-retirement health care plans. The cost is not fixed but rather moves (mostly increases) with time. A lot of school districts offered "Early Retirement" incentives which in the short-term helped reduce costs in their annual General/Operating Funds, but shifted costs to the pension and retiree healthcare plans. There's now a need to adequately fund these "shifted" costs. In my opinion, it's time to finally transition away from these "Defined Benefit" plans in our school districts. This happened in the private sector for non-union employees back in the 1990's and for many other folks (union and non-union) over the last decade. It's now time to address this issue in our public schools; otherwise many will face bankruptcy like Chrysler, GM, Detroit, etc.
Frank Lee
4:06 pm on Monday, April 2, 2012
Prior to 2008 the vast majority of public pension funds were funded, and Preforming well enough that public administrators were legally allowed to skip payments, offering politicians the opportunities to use pension surpluses to fund new spending or cut taxes. Prior to 2008 public pensions were on firm footing. However public pension funds invested billions of dollars in collateralized debt obligations sold as investment grade bonds. Investment Brokers and bond rating agencies illegally and unethically bundled sub prime loans with other debt obligations and rated them as AAA. The brokerage houses made billions of dollars selling these toxic assets to pension funds and 401 k's then splitting the money with the rating agencies who rated the bonds AAA. For years these complicated financial securities often paid 6% allowing public pension funds to be overfunded on paper. The politicians took this opportunity to spend what was not theirs. Then the market crashed. We learned these alleged AAA credit rated investments were toxic and worthless. The pension funds were wiped out, millions of 401'ks went negative and Wall St teetered on Bankruptcy. Lehman Brothers went belly-up, Bear Sterns was next but was rescued by a 30 billion dollar loan from the New York Fed and sold to JP Morgan. Wall St, hat in hand went to Washington and received bailout exceeding 1 trillion dollars. So we bailout bankers but not teachers? This issue is not a simple as Lansing wants to make it seem
Lee Jacobsen
4:31 pm on Monday, April 2, 2012
Dearborn Taxpayer has it right, the company payment pension and profit sharing went away long ago, the 401K is considered one of the best ways to save for retirement. Here is a link on how it works.
http://money.howstuffworks.com/personal-finance/retirement-planning/401k.htm
We match the employees up to 6% with investment plan contributions in the 401K plan of the employee's choice. The public sector should do the same and give the choice back to the teachers as to where their investments should go. This would also save the school district and taxpayers loads of money.
Bruce Koldys
5:12 pm on Monday, April 2, 2012
401ks are the best ways to save for retirement?. This is true when you destroy all others, in other words you have to destroy the retirement system to save it. Right. Defined pension plans DO NOT relate ONLY to teachers, in fact non instructional employees are greater in number than teachers. The pension plans were designed and negotiated in lieu of payscales and other items by ALL employees, not just teachers so dont even begin to spout that "they only work 10 months out of the year crap". Destroying someones retirement system and saying at the same time that its OK, the 401k is really better is like Col. Sanders telling
the chickens their new "retirement system" being a part of a Chicken McNugget is better than what they had when they were alive.
Frank Lee
5:29 pm on Monday, April 2, 2012
The objective fact is this. These public pensions are underfunded because politicians choose to spend pension surpluses on new spending and tax cuts. When the bottom fell out on Wall St. The politicians decided to bailout the investors and let the teachers, fireman, and police hang in the wind. The problem is not the public pension. They can be fixed easy enough with slightly higher employee contributions. The problem is politicians not accountable to taxpayers, and an investment system that is complex beyond reason and non transparent. Politicians continue to protect investment bankers from their losses and investors return the favor with hundreds of millions of dollars in campaign donations. Rather than address this corrupt pay to play political system and an unsustainable and out of control investment system, it is easier to blame a teacher or janitor. The problem is much more complex and the illness more chronic than going to a 401k. This whole authoritarian attack on workers sponsored by corporations, think tanks, and billionaires is pathetic and only attracts resentful simpletons who do not understand the concept of functioning and healthy free markets.
Lee Jacobsen
7:11 pm on Monday, April 2, 2012
Decades ago, I used to manage my employee's pension and profit sharing system. One year, instead of the 30% gains they were used to, I only managed a gain of 10%, a down year. It happens. Some of them were upset, and wanted to control their own investments. Fine, they did not know how good they had it, so we went to 401K. The vested money in the pension and profit sharing was simply transferred to the employee's personal IRA and 401K accounts. Now, they choose where the money goes, I can match up to 6% in good years, and my liability is zero. Everyone wins. Do the same with the janitors and teachers. Transter it out of the pension funds and give them the money directly, to be put into 401s and IRAs. Then the liability shifts from the City and taxpayers, to the employees, on where the contributions go. No more worries about being underfunded. No more worries , like Inskter, which may default on paying city pensions due to inept investment decisions. Place those decisions in the hands of the city employees, teachers, and janitors, it's their money for retirement, let them deal with it as they see fit. Would you rather invest your money, or let someone else like the city have the control and do it??? I would rather have a choice, and he 401K allows choice.
Dearborn Taxpayer
8:55 am on Tuesday, April 3, 2012
There's a little "revisionist history" being reported here. The issue of the increased need for pension funding is not caused by politicians, Wall Street or bailouts. In fact, large pension funds which typically invest a majority of assets in a diversified portfolio of bonds and other fixed income instruments have had decent returns over the last decade, including the 2008 financial "crisis" period. Moreover, the percent of pension assets allocated to stocks has almost fully recovered from the 2008 period over the last 2 years. The primary driver for the need for increased pension funding is the low interest rate environment that the Fed has us stuck in and simple baby-boom demographics (more retirees drawing funds but fewer workers paying in). The low interest rate and easy money policies of the Fed severely punish savers, pension funds, and seniors living on fixed incomes. Since our lawmakers seem reluctant to end or at least reign in the Fed's policies, we need to move folks to retirement plans that let people control and take risks as is appropriate for them (i.e. 401k plans like Lee recommends) as well as increase the contributions from employees who are in these "old" defined benefit plans (like Frank recommends). It seems to me that the answer is probably a combination of what each of you are saying. The worse course of action would be to take additional taxpayer money to fund these unsustainable defined benefit plans.
Frank Lee
9:52 am on Tuesday, April 3, 2012
These benefit plans are not unsustainable. They have been sustainable for over 50 years. What is not sustainable is an economy where financial power equals political power, and unaccountable politicians continue to engage in practices that do not serve the common good, but the bottom line of their quarterly campaign donations. It is a sick and pathetic fact that there is a direct relationship between campaign funds raised and electoral success. It is 80 % in the house and 85% in the senate - victory
percentage for the candidate with the largest dollars spent. The ability to be a viable candidate in today's environment is primarily based on the ability to spend money, and not sound public policy. So rather than find a constructive way to reward teachers, and balance that with fiscal prudence, we get hysterical reactions and hyper tribalism. The alternative of holding politicians accountable, and sound regulation of the financial services industry insuring a transparent securities marketplace is unthinkable. Instead bang the drum of resentment and blame the very people who bring value to our society. The teachers, firemen, and police.
Dearborn Taxpayer
12:50 pm on Tuesday, April 3, 2012
Perhaps the plans can be sustained, but then many of the organizations that fund them will not be (hence bankruptcy for many of the companies and public entities that cling to these out-dated retirement plans). The horse and buggy were/are sustainable means of transportation, but we've progressed since then to create new means of transportation over the last 100 years. Same for defined benefit pension and healthcare plans. These types of defined benefit plans may well have been nice to have in their day (post WWII) and could be sustained today if we continue to feed and care for them just like those few who continue with the horse and buggy to get around today. But there's certainly better ways 50+ years later for folks and taxpayers to fund their retirements. The time is now to make the changes needed to bring the public sector into reality with the rest of us. As for unaccountable politicians and candidates who enrich themselves on public funds at the expense of taxpayers and sound fiscal/public policy, I agee it is sick and pathetic. Unfortunately, we have one of the worst examples of this currently leading Wayne County. And our local elected officials and administrators give him hugs and handshakes when he attends our "State of the City." How pathetic is right... P.S. My wife is a public school teacher and I see every day the value she brings regardless of what kind of pension she has...
Frank Lee
4:55 pm on Tuesday, April 3, 2012
Wayne County is hardly the best or most aggregious example of political cronyism and influence peddling in Michigan. It exists in Dearborn with the rotten deal that stuck taxpayers With millions of dollars in debts and unfounded obligations for the Montogemry Wards building. it exists in Lansing where the state passed a law absolving the chair of the Michigan GOP's brother from a 2.5 million dollar debt from Wells Fargo, it exists in Oakland County where Al Brooks used his position to influence a police officer from arresting him for driving under the influence. Unaccountable politicians using public resources to enrich themselves and their sponsors at the expense of the public treasury are hardly the monopoly of one party, city, or county. Until citizens demand accountability and transparency from their elected leaders over tribalism and resentment nobody is safe in any county or with any party.
Bruce Koldys
8:18 am on Wednesday, April 4, 2012
If someone or a group of people (Republicans) believe in an issue or position, then is it too much to ask that they be intellectually honest and take ownership of these positions? When they do not do so and skirt the issues they illuminate the fact that they are not intellectually upfront.Elimination of pension plans, retirement, right to work, eliminate payroll deduction of union dues are all in their hope chest. It is their objective to eliminate or cripple collective bargaining, eliminate any type of retirement plans other than 401ks, reduce and hopefully eliminate all unemployment and public assistance benefits and create the most basic and primal dog eat dog and the rich get richer "free enterprise" system they can. I could have a tad more respect for them if they would just man up and admit it.
Alan Feldman
8:29 am on Saturday, July 14, 2012
Dear Lee--Who are you and what do you know about--teaching--discipline--being taken advantage on the job. Abuse racism lack of respect etc. . .Now you an outsider has all the answers for people who are givers not takers. Give me something Lee--shut up!
Lee Jacobsen
12:11 pm on Sunday, July 15, 2012
Alan, who are you , just another outsider? What are your solutions? It's time that folk, including teachers, are responsible for some , if not all , of their investment choices, and 401s are one avenue. Don't like the pension or retirement options the city is offering? 401s give you the freedom to make your own choices. As educators, I am sure they will make wise decisions and do much better in providing for their financial security than anyone else, right?
Bruce, regarding ownership of common sense positions, who is eliminating right to work? We all have freedom of choice in the work place, and make choices based on free will. Workers have the free will to quit. Employers have the free will to let folk go. If workers want a union, fine, but they should collect dues, not expect employers to do it. Unions are not charity cases. Do the unions believe in 'freedom of choice' of 'free will' for their members?
Come on Bruce, fess up, you don't believe in those 'kind' of freedoms.