Wednesday, May 23, 2007

Movement On Fixing Pensions?

Finally, some forward progress on expense relief for schools. As part of the current budget negotiations the House is considering a bill (HB 4530) to “revalue” the assets in the teacher’s pension fund. This bill has already passed in the Senate. In reality this bill represents an accounting trick that will lower the school districts current pension contribution. This is welcome relief but make no mistake – this is a temporary fix. The fundamental problem continues to persist – extraordinarily generous healthcare benefits coupled with fewer new teachers and more retried teachers churning through the system.

The bill will defer $190 million in current year expense along with $93 million in lower contribution to cover interest only on the amortization of the $24 Billion accrued liability. This only buys time – it does not fix anything. But it most assuredly a helps, so here’s to you Lansing – now make sure you don’t drop this ball or we all suffer.

One thing to consider – how is this “savings” going to be allocated? The expense associated with the pension contributions is based on individual district payroll numbers. If this comes as a “per student” number it will accrue to each district in a way that does not reflect the districts prior contributions. Ideally, it should be allocated as a formula offset for each district; stay tuned for the resolution as the bill moves through the house. Click here to see a summary.

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