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Report: Pension costs eat up education funding, and teacher pay stagnates

Citizens Research Council of Michigan

Any growth in state education spending over the past five years is being eaten up by greater teacher retiree system costs, according to a new report from the Citizens Research Council of Michigan.

Since 2012, school districts have had to return per-pupil funds to the state to cover unfunded liabilities in the Michigan Public School Employee Retirement System (MPSERS). According to current projections, those liabilities won’t be paid off until 2038.

According to the Citizens Research Council, that required contribution has eaten up the modest 12% increase in state per-pupil spending since 2013. And that’s reflected in average teacher pay, which has been stagnant at around $62,000 a year since 2008.

“You can use that [state] money to pay the liabilities, or to pay for current costs, but you can’t use it for both things,” said CRC President Eric Lupher. “The pensions are getting the money, and that means there’s very little money going into the classroom, going into increases in teacher pay.”

On average, Michigan teachers do fairly well nationally—average teacher pay is 13th-most in the nation. But Lupher said that average disguises some more troubling facts.

Starting teacher salaries in Michigan are less than the national average for new educators. And when adjusted for inflation, average teacher pay in the state has actually declined by 10% since 2008.

The same is true for per-pupil spending—while it’s recovered since 2013 after dipping during the Great Recession, it hasn’t recovered enough in real terms to make up the gap. Inflation-adjusted per-pupil spending is still 7% below what it was in 2008. A recent Michigan State University study found that Michigan saw the sharpest decline in school funding nationally from 1995-2015.

“It’s a pretty straightforward policy response to this, but it’s not an easy one,” Lupher said. “The state Legislature needs to account for the increased pension obligations," and “needs to be appropriating above that amount” to really boost education funding. “It’s a question of how much of the state resources are available, does the Legislature want to make available, to improve education?” he said.

Lupher said if Michigan is serious about improving its educational performance, it needs to attract and retain talented teachers—and that won’t happen without a concerted effort to boost their pay.

“We have to think about the future,” Lupher said. “Is this going to be an attractive salary, an attractive profession for new people coming in to teach tomorrow’s students?”

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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