LANSING, Mich. (AP) -- Lawmakers and Michigan's largest teachers union are revising a retirement incentive proposal to address concerns it's too expensive.
The Michigan Education Association wants to entice school employees already eligible for retirement to retire before July 2010 by promising them higher monthly pension checks.
Democratic Gov. Jennifer Granholm opposes the change, and a key sponsor of the plan may pull the plug next week if a compromise isn't reached.
Supporters say the plan would open up thousands of jobs so new college graduates could stay and work in Michigan, stimulating the battered economy. They stress the unfunded liability of Michigan Public School Employees Retirement System could be increased no more than $1.5 billion under the legislation.
The cap would ensure that no more than about 29,000 of the state's 62,000 retirement-eligible employees could take advantage of a better pension.
But detractors say getting an influx of younger teachers by enticing veterans with higher pensions would cost more later on.
"This is a short-term solution which will have consequences that will be long-term for districts," said Susan Meston, superintendent of the Muskegon Area Intermediate School District.
The head of the Senate Education Committee said school district administrators are telling him teachers they thought would retire are holding off to see if better pension payments are adopted.
"We've got to decide pretty quickly," said Sen. Wayne Kuipers, R-Holland.
Backers say layoffs could be prevented and districts would save money because newly hired teachers make less money and -- for those hired after July 2008 -- devote a larger share of their salary to their pension plan than veteran teachers.
"We've got a fairly significant brain drain going on here," Kuipers said. "One of the ways you stop that is creating some incentive for these new graduates to stay here. And that would be jobs."
But Meston worries her district would lose speech therapists along with experienced special education and career tech teachers and then have trouble replacing them while competing with other districts in the same situation.
"Everyone would leave at once. Now they kind of trickle away," she said.
The governor opposes increasing pensions because she has "ongoing concerns about raising long-term costs," spokeswoman Liz Boyd said Friday.
And some say it's unlikely as many teachers as expected would take part in the special deal. They note that, while their pension checks would be larger, teachers' private retirement savings may have taken a severe hit, prompting them to stay on.
Under current rules, pensions are calculated by multiplying a teacher's years of service by 1.5 percent of his or her final average compensation.
The MEA initially proposed boosting pensions by one-third by raising the multiplier to 2 percent. But that was criticized as being too expensive.
A Senate bill is being altered to shave the multiplier increase to 1.75 percent, which still would raise pensions for teachers who retire this school year or next by nearly 17 percent.
A teacher with average compensation of $60,000 at retirement and 30 years of service gets an annual pension of $27,000. Under the MEA's revised proposal, a teacher eligible for retirement who leaves by July 2010 would receive $31,500 a year, or $375 more a month.
Fiscal analysts haven't finished a review of the revised legislation.
But the nonpartisan Senate Fiscal Agency said the MEA's initial proposal would have cost hundreds of millions of dollars a year over five years -- a typical period for "smoothing out" an increase in future pension liability.
The MEA said the plan would save districts money and that the costs would be more manageable if spread over 30 years, the process used when former Gov. John Engler offered early retirement packages to state workers in 2002.
But Kathryn Summers-Coty, a Senate fiscal analyst, said five years is the period over which school districts would save money by paying younger teachers less than the teachers they replaced, allowing them to put the savings into the retirement system.
Steve Goff, who teaches economics, government and history at Meridian High School in Sanford, visited Lansing Thursday to testify against the MEA's initial proposal.
He called it a "massive" benefit for a select group of teachers. He favors permanently boosting pensions nearly 7 percent for all school employees if they agree to retire within one year of becoming eligible for retirement.
"All (MSEPRS) members would have the opportunity to participate," said Goff, 48, president of the Meridian Education Association. "There is nothing more important to teacher cost containment than the timely retirement of eligible members."
------
David Eggert can be reached at deggert(at)ap.org
------
The pension bills are Senate Bill 255 and House Bill 4285.
------
On the Net:
Michigan Legislature: http://www.legislature.mi.gov
Michigan Education Association: http://www.mea.org
Sen. Wayne Kuipers: http://www.senate.michigan.gov/gop/senators/Kuipers.asp?District=30
Senate Fiscal Agency: http://www.senate.michigan.gov/sfa