Thursday, February 07, 2008

Governor Granholm and the Big $31 Billion Pension Problem

The state Teachers Pension fund (MPSERS) is millstone around Michigan’s neck. Any promised funding, programs or “initiatives” promoted by the Governor will be driven into the ground by a pension system destined to bankrupt the State of Michigan unless legislators and the Governor take action now. That is a bold statement but there is no other way to characterize a $31 BILLION deficit (click on highlighted text for details). That number represents nearly $18,780 per child in the state of Michigan.

The rapidly growing platinum plated promises embedded in the Michigan Public School Teachers Pension Plan threaten to choke off funding for every school district in the state, and potentially accelerate the downward financial spiral of Michigan’s already shaky standing in the credit markets.

Lest you say that I’m chicken little crying about the falling sky spend some time with the following data (for those that want to check, the full report is here: Pension Reports)

The chart above represents the growth in UNFUNDED pension promises made to the good men and women teachers in our state. The total unfunded liability stands at nearly $31 Billion. I’ve written about this before, and the problem keeps getting worse with no end in sight. The 77% jump in unfunded health care costs between 2005 and 2006 (from $14 to $24.8 Billion) is the result of long overdue accounting changes that forced pension plans to FULLY disclose their costly unfunded promises. The pension’s unfunded health care costs have grown over 125% since 1999. Guess who pays for this - it comes out of the budget of every school district in Michigan without any reimbursement from the State. This disaster is costing jobs, it is costing programs, and it is threatening the very foundation of public education. This is exactly the same issue that brought GM, Ford, Chrysler and the UAW together in crafting transformational contract and pension agreements. School districts do not have the same opportunity - Lansing controls the pension (even as we have the costs forced on us) and must take the lead on fixing the problem.

Please forward this post to everyone you know. Have them forward the post to their representatives in Lansing. Demand action on reforming the system now and stop lying to tax payers, teachers, and school children about promises that we cannot keep. The crisis is growing and it threatens public education in exactly the same manner the unfunded liabilities of the domestic auto makers threatened that industry.

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