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?
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.