Republican lawmakers in Michigan recently introduced legislation to close the Michigan Public School Employees Retirement System (MPSERS) pension plan. The bills – S.B. 401 and H.B. 4647 – would move all employees hired after September 30 into a defined contribution 401(k).
Shuttering teacher pensions has been a top priority of Michigan’s Republican lawmakers for the past few years. They tried unsuccessfully to close MPSERS during a lame duck session in November of last year, but their attempt was met with a backlash from both workers and the administration of Governor Rick Snyder.
Despite their recent failure, lawmakers are at it again with a renewed attempt to strip Michigan’s public school employees of their retirement security. Governor Snyder remains skeptical of the proposal – reforms to stabilize the funding of the system were made recently and the cost of closing the plan is astronomical. An independent analysis found that closing MPSERS and transitioning workers into a 401(k) would cost the state $46.2 billion dollars over a 40-year period. Costs to taxpayers would exceed $465 million annually in the first five years alone.
Governor Snyder is rightfully skeptical: Michigan is facing $60 billion in unmet need to repair the state’s crumbling infrastructure. Allocating billions to close the public school employees’ retirement system would dry up funding for the state’s aging roads and bridges while putting ‘additional pressure on classroom funding’, according to the Office of Retirement Services.
Undeterred by the exorbitant costs, Republican legislators in Lansing continue their assault on pensions with the support of the influential DeVos family, who declared eliminating pensions their ‘number 1 priority in Michigan policy’.
Snyder’s continued resistance to the costly pension closure has yielded an impasse in state budget talks. Over Memorial Day Weekend, Republicans signed target spending levels, without the input or agreement of the Governor, that earmarked $475 million to cover initial costs to close the pension system. If Snyder remains steadfast in his opposition, gridlock over MPSERS could delay the budget process.
Working families in Michigan have once again made their voices heard with thousands of calls and emails flooding the offices of state legislators. Protesters assembled outside the office of Republican Leader Arlan Meekhof in a show of support and solidarity for teachers and public school employees.
We’ve written extensively about the consequences of closing a pension plan (spoiler alert: it’s a terrible idea). Michigan has already experienced this first hand; after closing the pension plan for state employees in 1997, funding levels plummeted from 109% to 60% – a mistake lawmakers can’t afford to make again.
Shuttering MPSERS would not only jeopardize the retirement security of Michigan’s public school employees, it would cost the state billions while preventing essential funding for state programs like infrastructure repair. Governor Snyder should remain resolute in his opposition to this fiscally-irresponsible legislation.