Pension Rate Jump Could Cost Dearborn Schools $1 Million

Dearborn Public Schools could face the prospect of a painful paring of its budget because of an ongoing legal struggle between the Michigan Office of Retirement Services and the state’s two largest teacher unions about the legality of requiring teachers to pay an additional 3 percent toward their health care.

During Monday night’s Dearborn Board of Education meeting, Supt. Brian Whiston said the pension rate would be increased about 1 percent—from the expected 24.46 to 25.36 percent—which would cost the schools $1 million from this year’s general fund budget.

“For every month that the lawsuit goes unsettled, it costs about $111,000, so we certainly hope they settle it soon," said Whiston.

He added that this is also the first week that paychecks for the district’s 1,100 teachers will reflect pay decreases of about 7 percent agreed to in the district contract with its teacher’s union, the Dearborn Federation of Teachers.

“It’s been a tough time for everyone,” he said.

Dave Mustonen, the district’s spokesman, said Michigan districts were notified of the increase Friday, and that officials are looking for ways to find the $1 million in an already tight budget.

“We’re looking in a lot of different places where we can trim,” he said. “But there are other factors that come into play, including our enrollment, which may effect this situation.”

The 18,500-student district, if it gains students, will realize per-pupil funding increases. But on the down side, if there are student losses, additional monies could be lost, said Mustonen.

The official student count will take place in early October.

The lawsuit at issue was filed by the teachers unions—the Michigan Education Association and the American Federation of Teachers—two years ago when the state imposed the 3 percent pension deduction on public school employees. The deduction is now in limbo as the situation moves through the court system.

Initially, districts thought that a scheduled pension rate increase of 27.37 for the 2012-13 school year was a possibility, until lawmakers tentatively agreed to freeze that rate at 24.46. However, state officials have said they need to increase the rate until a final decision is made.

Had the scheduled 3 percent increase taken place, the district could have lost $3.5 million.

The cuts, if they come to fruition, would have to be made by June 30, 2013, to balance the books on this fiscal year.