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Legislation to permanently end a 3% tax many public school teachers pay into a health care fund for their retirement has been signed into law by Gov. Gretchen Whitmer.
House Bill 5803, sponsored by state Rep. Matt Koleszar (D-Plymouth), also permanently reduces the payroll rate for school districts contributing to the Michigan Public School Employee Retirement System (MPSERS) was given final passage last week by the Michigan House and reduces the MPSERS payroll rate by 5.75%, providing school districts with the ability to reallocate funds that would have otherwise gone into retirement system contributions.
“This new law will put funding back into schools and is a direct investment in classrooms in every district across the state,” said Tina Kerr, executive director of the Michigan Association of Superintendents and Administrators (MASA). “School districts will now have more predictable funding, which will benefit students, teachers, and staff alike. We very much appreciate Rep. Koleszar for his leadership in introducing this legislation and navigating it through the process.”
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Supporters say the rate reduction will allow districts to reallocate funds back into classrooms, while the end of the 3% health care contribution will also put more money back into the pockets of school employees.
“This legislation returns approximately $600 million back to schools — that’s money going directly into classrooms and back to teachers, where it belongs,” said Koleszar, chair of the House Education Committee. “As a teacher-turned-legislator, I am proud to see my bill put an end to overpayment into our school’s employee retirement system. My fiscally responsible bill will give back funds to schools to put toward their unique needs, because parents deserve to send their kids to schools that are empowered to put their students first.”
The plan to reduce MPSERS payments was first proposed by Whitmer when she rolled out her $80.7 billion budget blueprint in February, allowing the Democratic-led Legislature to redirect $670 million from the system into additional funding for schools.
From the beginning, however, Republicans have decried the move as a “raid” on the teacher’s retirement system, and that opposition remained even as the bill received final passage.
“Democrats aren’t thinking about the long-term implications of this vote,” said state Rep. Luke Meerman (R-Coopersville). “Pillaging public teacher’s retirement accounts to fund frivolous government expansions, and unnecessary programs, is unacceptable. And creates a mess for the next generation to clean-up.”
The dispute over the contributions centers on the fact that the teacher retirement system has two parts; one that funds health care costs, which is fully funded, and the other that covers pension liabilities, which is not.
Whitmer and her fellow Democrats in the Legislature say those are separate funds and the state no longer needs to pay off additional costs, likening it to a homeowner paying off a mortgage early. Republicans have insisted they are both part of the same fund and the savings realized by the health care portion being paid off should be used to pay down the pension liability.
“Interrupting scheduled debt payments to pay for other spending measures is a sign that spending has gotten out of hand and government has gotten too big. It’s flat out irresponsible to gamble with the retirement plans of our hardworking teachers,” said Meerman.
However, school officials disagree, and see the law as a positive change for both school districts and educators.
“By lowering MPSERS costs, districts will be able to prioritize funding that directly impacts student learning,” said Don Wotruba, executive director of the Michigan Association of School Boards (MASB).
Wendy Zdeb, executive director of the Michigan Association of Secondary School Principals (MASSP), said the legislation would help ease the financial burden educators in Michigan had been working under for years.
“Eliminating the 3% employee contribution will make a significant difference in the lives of our school staff, and I’m grateful to the Legislature and Governor Whitmer for supporting public schools in such a meaningful way,” said Zdeb. “This is a practical solution that both reduces costs for schools and increases take-home pay for school staff, something educators will certainly appreciate.”
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