Tuesday, March 06, 2007

The $24 BILLION Problem in School Funding


The political talk in Lansing is beginning to show signs of coming to grips with a long overdue reality check by restraining their health care costs. As it relates to Michigan public schools, the elephant in the living room is represented by the twin issues of health care and pension funding. The health care issue is something all Michigan residents can relate to; we've all suffered from the slow adjustment in confronting the cost of this formerly "invisible" benefit. When it was just something added to the pay package consumers never had to worry that they may overuse, abuse, and misuse the service. Now, with co-pays, high deductibles, health savings accounts, and real world budgeting requirements the true cost of staying healthy is being brought into focus. In the long run, maybe that's not a bad thing. In the short run institutions that don't adjust will suffer the consequences (see any major auto supplier or OEM in this state for proof). The system in Michigan is stacked against a rapid move towards effective cost management of health care costs. Closed programs that hide cost data while at the same time keeping premium rebates away from local school districts AND their own members contribute to the issue. Health care costs must be addressed cooperatively and comprehensively. The status quo is no longer viable - the move to limit costs in Lansing is a welcome baby step.


The bigger issue is the poor condition of the teachers pension fund; something all teachers should be focused on because the problem is getting worse, and the "solution" is being plied on the shoulders of each and every public school district and university in the state. Because the fund carries a DEFICIT OF $24 BILLION on the promised benefits (click on THIS to see a copy of the $10 BILLION pension benefit in the current audit, click on THIS to see a copy of the $14 BILLION health care cost obligation disclosed in the audit), the state has mandated ever increasing contributions from the employers of the teachers (i.e., the schools) while refusing to fund those costs as a way to balance its own budget.

The net result, with salaries and benefits represents nearly 90% of all operating budgets - cuts in personnel. Guess what that does? It exacerbates the problem because with each cut there are fewer employees supporting the system, so the required contribution rate goes up. Everyone needs to step up and address this problem, the Democrats, the Republicans, the Governor, and the Union. Please write to your representatives, cite this blog, or just point them all in the right direction by having them READ the audit report, have them focus on page 8 and page 43 (caution, this will load a .pdf file) where the full extent of the problem is revealed. We cannot stick our heads in the sand if we hope to survive this crisis. Health care must be addressed, the pension system must be reformed, leadership must step-up and work together to get it done – that’s why they were elected.

1 comment:

Mike Reno said...

Well said, Rob.

You had a similar opinion piece in Crain's Detroit Business a few months back.

Unfortunately, there is no easy way to contact you to say, "Great Job!"

The Birmingham Schools Website provides no contact info, nor does your blog.

So, I'll say it here!

Great Job!

==> Mike.