Pension incentives for teachers eyed

February 16, 2009
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LANSING — Two southwest Michigan school chiefs are urging caution toward a Michigan Education Association money-saving proposal that would encourage eligible school employees to retire sooner by increasing pension benefits.

Supporters say the MEA plan would increase the average participant’s benefits by $500 a month.

The MEA, the state’s largest union of school personnel, said if 10 percent of eligible employees take advantage of the plan, school districts would save $1.7 billion over the next decade.

Savings would occur when new teachers and staff with lower starting salaries replace retired workers.

But Roger Rathburn, superintendent of the Three Rivers School District, said the plan, which requires legislative action, has both strengths and weaknesses.

“The proposal in its current form is probably too expensive,” he said. “The upside I see is that it would cost a little money, but if you look at it as creating new jobs, you would have thousands of people voluntarily move into retirement.

“Most people who would retire would stay here and spend dollars. They open the door for thousands of people to find employment. From a job stimulus package perspective, it makes sense,” he said.

Robert Olsen, superintendent of the Sturgis School District, said the proposal sounds good in theory but not in reality.

“In general, if the state could afford it and we as individuals could afford the rate increase to cover the retirement costs, then I think it’s a great idea,” he said. “But I don’t believe there’s enough funding.”

The current pension formula takes the average salary of a worker’s final three years and multiplies it by 1.5 percent. That figure is multiplied by the number of years of work. The MEA wants to increase the multiplier to 2 percent.

However, Rathburn said the proposal’s formula is too generous.

“Because the proposal came from the MEA, they’re looking out for their membership,” he said. “But the same things can be accomplished with a multiplier of less than two. If they used a 1.75 multiplier, it would still move people out but it wouldn’t be nearly as expensive.”

Michael Flanagan, state superintendent of public instruction, said pension benefits should not be determined by the state.

“That should be done strictly through the local level,” he said. “I wouldn’t recommend a statewide action because it places a burden on the retirement fund that’s enormous and is already underfunded.

“You can get those same incentives at a local level,” he said.

But Rathburn disagreed that all incentives can be met solely by individual school districts.

He said Flanagan “is correct if he’s just focusing on teachers. But locals don’t have the ability to do it with support workers and save any money. We have more support staff than we do teachers.

“The state operates the pension program for all school employees like the maintenance workers, the paraprofessionals, food service workers and secretaries,” Rathburn said.

If the proposal is approved, Olsen, of Sturgis, said his schools would suffer.

“I think we have 15 people that are eligible for retirement and another few who are close,” he said. “We would be hit hard and we would lose great teachers.”

For experienced staff, the plan “represents an almost 20 percent increase in your retirement benefit. How could you turn that down?” he said.

Rathburn said his district has roughly 20 teachers and 20 other employees who would be eligible for the improved benefits.

“If it happens, I hope that it happens quickly so that school districts have time to transition in new people and get the right people to do the job,” he said.

And Olsen said he fears that finding suitable replacements to teach certain subjects may be difficult.

“The state has mandated that all students have two credits of foreign language before they graduate,” he said. “When they institute that and everyone has to do it, think of all the foreign language teachers we will have to get.”

Flanagan also expressed concern that schools would lose too many veteran teachers of high-demand subjects such as science, math and special education.

He said Michigan’s teacher training programs graduate too few students in those fields to meet the state’s needs.

“If the state spends money on something it should be on signing bonuses for math and science teachers because we don’t have enough,” Flanagan said.

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