Friday, September 21, 2007

Lansing and Pensions: Waking Up To Reality

An editorial today in the Detroit Free Press by State Representative Lorence Wenke talks about the "Surpise?" that the state pension funds (PSERS and SERS) are in the hole to the tune of $20 - $40 BILLION dollars. What rock have these people been hiding under? I'm just a reasonable person who got elected to a local school board; about 3 months after my election in 2003 the state teachers pension time bomb was obvious to me. I've been harping on the issue for some time and by my research shows that PSERS (Michigan's teacher pension fund) is underwater by a total $24 billion (that's counting the retirement AND health care benefits). That pension deficit has cost local school budgets nearly $1 billion a year because the state has pushed that funding problem onto the backs of Michigan's children. How? By consistently increasing the mandated school district contribution to PSERS without increasing the per-student funding to cover the cost. It's a classic shell game.

Now the legislature wakes up to the fact their own employee's pension fund (SERS) is bleeding red ink in the promised retiree health care benefits - great. Add that to the cost of bailing out the teachers pension fund and you can see the need for the extra $2 billion in annual funding - and that number may be much larger.

Here's what Representative Wenke is not telling you: the unfunded liability for just the retirement portion of the pensions (excluding the health care component) is at least $10 billion for PSERS and $2.5 billion for SERS. Understand that the retirement benefit is not optional - workers and teachers have been promised these benefits and they should be able to collect on those promises. So that gets added to the additional funding he is worried about. Somewhere things have to change or be adjusted and Representative Wenke is focused on the health care promise - and those benefits are NOT like the retirement promise (which is legally locked in for states, a big difference between a state and a corporation). It's time for everyone to face the magnitude of the crisis. Keeping the status quo will only ensure the financial failure of this state, and a potentially deeper failure of a promise made to state employees and teachers.

Thank you Representative Wenke for shinning a light on the "surprise", but the problem you're looking at has been around for years and it's much bigger than you indicate - what's not a surprise is the continued inaction by Lansing.

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