Teachers Rail Against Pension Changes During Senate Hearing
Hundreds of teachers packed into a Senate sub-committee hearing in Lansing Wednesday, trying to stop a bill that would make them pay more for their pensions and health care.
Some teachers say the proposed changes are radical, even threatening. Supporters argue the state doesn't have a choice, given its massive unfunded pension liability.
Michigan has a more than $45 billion gap between projected retiree benefits and the money it needs to pay those benefits.
Senate Bill 1040 was introduced as a potential fix. It would have current employees, hired before July of 2010, contributing between five and eight percent for their pensions.
The bill also revamps health care premiums.
"I don't believe after sitting down and looking at the numbers that I'm going to be able to make it," one retired teacher said, during a pre-hearing event. "With health care issues, I see four doctors."
"Just this last January my pension is being taxed with the state income tax at four percent and now they're going to be doubling my health care expenses,"former teacher Dale Taylor added.
Taylor worked in special education for 30 years and retired two years ago. He's concerned the new legislation will bleed teachers dry.
Under it, they'll pay 20 percent of their health care premiums, instead of ten and they will need to be 60-years-old to collect those premiums.
The bill also ends retiree health care for new employees, replacing it with a 401K system and two percent employer match.
"What this is addressing is the overall balance sheet," State Senator Patrick Colbeck, (R) 7th District, explained. "So while the income statement or cash flow is looking good for the State of Michigan, we still have almost $47 billion dollars in unfunded liabilities that we're trying to address."
Colbeck says the current system is simply unsustainable. If we don't make a change, he says Michigan will be passing the buck to its children.
"Teachers are in that profession because they value the kids that they're working with," Colbeck said. "If we do nothing right now, we're going to place all the burden for paying for the benefits that they're getting right now when they retire, we're going to put all that burden on the kids and that's unfair."
But if those changes happen, some educators say they may not be able to retire at all.
"I will actually have to work until I die as they say, I won't be able to afford to retire," Lois Murray, an employee at Lansing Community College said.
While most teachers are opposed, school districts have been pushing for an overhaul of the retirement system for years. A non-partisan analysis of Senate Bill 1040 shows the changes would cut retirement costs for districts by 3.5 percent in the first year.
This year, for every dollar a district pays in salary more than 24 cents goes to retirement costs. By the 2013-2014 school year, officials say that could rise to 40 cents.
A look at proposed changes contained in Senate Bill 1040 to lessen the state's unfunded liabilities for school employees' retirement costs. Public testimony was taken on the bill during Wednesday's Senate Appropriations Retirement Subcommittee hearing.
--Teachers hired before 1990 who are in the basic pension system would pay 5 percent of their salary toward defined benefit pensions, while those hired after that would pay 8 percent. Currently those in the basic pension system pay nothing while those hired after 1989 pay 3 percent to 6.4 percent based on their salary. Some teachers hired before 1990 are in the latter system.
--School employees could decline to pay the extra amount if they agreed to receive less retirement money. They also could freeze their pensions and move to a 401(k) style system.
--Employees hired after July 1, 2010 are in a hybrid system blending defined benefit and defined contribution systems and would see no change.
--Employees hired after July 1 would not be offered health care in retirement. Instead, the state would give them 2 percent of their pay to invest to cover health costs in retirement.
--Most current teachers would have to work longer -- until age 60 -- to qualify for retiree health care, although a phase-in would allow some long-time teachers to qualify at earlier ages.
--All retirees would have to pay 20 percent of their health care premiums starting July 1, up from about 10 percent now.
--School employees would continue to pay 3 percent toward retiree health care costs.