The Gongwer Blog

School Groups: OPEB Overpayment Isn't The State's To Use

By Alethia Kasben
Managing Editor
Posted: June 14, 2024 1:09 PM

The reason the other post-employment benefits portion of teacher retirement fund is fully funded is because of sacrifices educators have made and the funds should be put toward reducing their costs, school groups said during a press conference on Wednesday.

A coalition of school groups continues to hammer the Legislature and Governor Gretchen Whitmer about a budget proposal that would divert $670 million from the state's contribution to the other post-employment benefits in the Michigan Public School Employees' Retirement System toward other School Aid Fund priorities.

The groups instead want to see that $670 million used to reduce its payroll contribution toward MPSERS and eliminate the requirement for some teachers to pay 3 percent of health care costs.

This week, the pressure has intensified as the groups are tying their opposition to an economic development package that would set a dedicated funding stream toward corporate incentives, housing, transit and other community improvements for the next decade.

The coalition of groups that supports traditional public schools traditionally aligns with Whitmer and Democrats, making for a showdown between allies, particularly considering the Michigan Education Association – long a top supporter of Whitmer and the Democratic caucuses – is part of the coalition.

House Appropriations Committee Chair Rep. Angela Witwer (D-Delta Township) told reporters Wednesday that lawmakers "will always work with our teachers."

A Whitmer spokesperson on Tuesday panned the school group's opposition as "misinformation," and said the governor has been a staunch ally for students and teachers.

"The fact is every penny remains in the School Aid Fund, and we are re-investing the additional $670 million in supporting children's education and boosting teacher paychecks, which remains one of our top priorities," Stacey LaRouche said.

The complaint from school groups is that while the money would remain in the School Aid Fund, it could go toward categoricals like preschool, community college tuition aid, projects at specific districts and many other programs instead of going directly into K-12 school operations.

MEA President Chandra Madafferi referenced a recent report that said the state's inflation-adjusted teacher salary fell by 20.6 percent from 1999 through 2021, much larger than the national average of a drop of 4.2 percent.

Madafferi and the other groups are asking the Legislature to continue paying the $670 million and reduce what the schools pay to MPSERS so they can reduce the payroll costs they send to the fund by roughly 7 percent.

"Using the $670 million previously earmarked for paying down the now cleared debt to instead support student learning and educator compensation would return an average of $500 per pupil to school districts," she said. "And educators would no longer be required to pay the 3 percent health care contribution."

Peter Spadafore, executive director of the Michigan Alliance for Student Opportunity, said for too long the School Aid Fund has been used as a "supplemental piggy bank" for the General Fund.

The Legislature is considering legislation that would continue funding the Strategic Outreach and Attraction Reserve Fund for a decade though the school groups are calling for a pause on those conversations.

Referencing the Tuesday letter, he said the school groups are "agnostic" on the economic development policy being suggested by the Legislature.

"We are urging the Legislature not to adopt any long-term spending plans, particularly multibillion dollar ones, that would put undue pressure on the General Fund and squeeze more School Aid Fund dollars into General Fund programs," he said. "So it's a link that is there because of the fungibility of the School Aid Fund to the General Fund. And if we could fix that fungibility issue, I think that that creates a different conversation. But right now, we're urging caution on any major spending plan, regardless of funding source, until we're sure those dollars are going back to the classroom."

Witwer, referencing the long-term spending of the current economic development proposal, said she hasn't read the bills yet and she assumes changes will be made.

On the budget proposal being considered, Witwer said she isn't sure if it will be a problem in the Senate. But Senate Minority Leader Aric Nesbitt (R-Porter Township) in a statement Wednesday indicated the Senate GOP is considering withholding immediate effect based on the retirement fund shift.

Republicans have also been critical of SOAR and the broader economic development policy under Democratic control.

"We can protect teacher retirements by paying down MPSERS debt by an additional $670 million and we can invest $600 million more directly into classrooms by reducing schools' MPSERS contribution rate as education groups have called for if Democrats abandon their latest corporate welfare scheme," Nesbitt said. "Senate Republicans are ready to provide immediate effect to an education budget that puts tax dollars into improving Michigan's woeful educational outcomes rather than the stock dividends of Fortune 500 companies. Let's put classrooms over corporations."

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