New Bill Proposes Changing Teacher Retirement to 401(k)

By: Rachel Thomas Email
By: Rachel Thomas Email
Pensions for teachers and other school employees have been the target recently as lawmakers look for ways to fill the state

File Photo
In this 2008 file photo, Ivy Prep students Kennedy Jenkins, from left, Kandace Barzey and Ramsha Mirza wait to get their work checked by their teacher, Rumana Khan during class.

Every year, Michigan schools take more cuts, but the state makes them pay more in employee retirement. It's a skyrocketting system that school officials want brought back down to earth.

"Every year it goes up and we don't have a say in it because the state gives us the number," said Guillermo Z. Lopez, a member on Lansing's School Board.

A new bill in the works proposes a structual change moving all new school employees to a 401(k) plan instead of the current pension retirement plan.

"Out of every dollar we pay for a teacher more than 20 cents goes into their retirement system. It is projected next year to go up over 17 cents for every dollar. It's simply not sustainable," said Sen. Rick Jones, (R) Grand Ledge.

In local school districts, about 10 to 20 percent of their current budgets go to pay teacher pensions and healthcare who are no longer working in the classroom.

In Lansing, 85 percent of the school's budget goes to current and retired employee wages and pension. Those employees are protected by the state's constitution. So, school board members say the new measure could be a step in the right direction, but won't have an immediate impact.

"It will cover new employees not existing employees. So we still have to deal with whatever those costs are," said Lopez.

School officials say it would likely save them money down the road, but would cost the state $200 million a year for two decades to make the switch. A price the Michigan Eduation Association (MEA) says is one reason they don't support the move. But others say its a price Michigan needs to pay.

"We don't have a choice. We must change the system or it will devastate school funding in the future," said Sen. Jones.

Lawmakers and educators agree it would be a costly move. But supporters say it could fix the system. Senator Jones plans to introduce his bill within the next two months.

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  • by Concerned Citizen Location: Michigan on Apr 6, 2011 at 12:17 PM
    Just wondering, how much do State Senators and Reps get paid in their pensions and how many years to they have to work to receive theirs? Maybe they need to consider looking at themselves before pointing their fingers at others.
  • by A Taxpaper Location: Charlotte, MI on Apr 6, 2011 at 04:40 AM
    All puplic employees should be changed to 401K's, not just one group of workers. Also, convert all pensions to 401k's and take the one time hit.
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