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Michigan Senate votes to lower schools’ retirement contributions

Lansing — The Michigan Senate voted Tuesday to permanently decrease the cap on contributions that school districts must make toward unfunded liabilities in the teacher retirement system, a change that had been pushed for by state educators.

The vote came nearly three months after lawmakers approved a state budget that provided more dollars to schools by lowering the retirement rate cap from about 21% of payroll to 15.2% for the fiscal year that begins Oct. 1.

However, to the frustration of groups that lobby on behalf of school districts, the Democratic-controlled Legislature didn’t finalize, before summer break, a separate measure that would have kept the lower payroll rate cap in place going forward.

The state Senate returned Tuesday and passed a bill to do just that: setting the rate cap at 15.2% into the future. The new legislation would shift about $600 million to $700 million in costs annually away from districts and to the state’s School Aid Fund, according to the nonpartisan Senate Fiscal Agency.

“We have now completely codified the 5.75% rate reduction right away, which will put hundreds of millions of dollars back into the classroom immediately, and for the long term,” said Sen. Darrin Camilleri, D-Trenton.

The bill passed along party lines, 20-16, with Democrats in support and Republicans in opposition. Two GOP lawmakers weren’t present.

Senate Minority Leader Aric Nesbitt, R-Porter Township, spoke out against the proposal before the vote, saying the legislation was an “empty win for the tax takers over the taxpayers.”

“The bill before us is everything that is wrong with government, a cynical money grab whose victims won’t notice it until the thieves are long gone out of this building,” Nesbitt said.

Democratic Gov. Gretchen Whitmer has argued, throughout the year, in favor of financial changes regarding the teacher retirement system, noting the fiscal year 2022 annual comprehensive report showed the system’s fund for retiree health care had $641 million in assets exceeding liabilities for benefits owed.

But Sen. Thomas Albert, R-Lowell, said on Tuesday, Michigan was still facing overall teacher pension debt and Democrats were displaying an “insatiable appetite to spend.”

“These costs are not going to go away,” Albert said. “They’re only being pushed down the road. And when they’re pushed down the road further, you incur more interest costs. It’s more expensive. It puts retirees’ benefits at risk. It takes money out of the classroom to help educate our kids.”

In June, the state House approved a similar measure to the Senate’s legislation. Now, the Senate-approved bill will have to go back to the House for a vote.

Peter Spadafore, executive director of the Michigan Alliance for Student Opportunity, which advocates on behalf of school districts, said he was hopeful the House would vote next week. The bill provides “long-term certainty for districts,” Spadafore said.

In a statement, Kenneth Gutman, superintendent of Oakland Schools, said the vote Tuesday marked “a significant step forward for public education funding in Michigan and will not only allow our schools to immediately invest additional resources toward the success of their students.”

Bobby Leddy, spokesman for Whitmer, said the Democratic governor had brought together legislators, education stakeholders and business leaders in a work group to find ways to save teachers money and invest more into schools.

“We look forward to passage of legislation that implements these solutions and delivers savings and lowers costs for our teachers,” Leddy said.

Beginning in fiscal year 2026, the bill would eliminate a requirement that certain educators contribute 3% of their compensation toward the normal costs of retiree health care benefits, shifting those costs estimated at about $150 million annually to the districts.

Chandra Madafferi, president of the Michigan Education Association, said the bill would “permanently end the state’s 3% tax on more than 100,000 veteran teachers and school support staff.”

“Our union has worked closely with lawmakers to pass this legislation because it will provide much-needed financial relief to hardworking educators and help alleviate some of the economic pressures contributing to the shortage of qualified educators in our children’s schools,” Madafferi said.

cmauger@detroitnews.com

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Publish date : 2024-09-17 07:03:00

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