Senate Dems OK retiree cost cut for Michigan schools over GOP objections

• Michigan Senate votes make public schools pay less into the state’s educator pension system
• Some current employees would also see more in their paycheck under the bill
• Republicans warn of long-term consequences for the change 

LANSING — Michigan public school districts would pay less into the state’s educator retiree pension system in future years under a bill approved Tuesday by the Democratic-led state Senate. 

The party-line vote for a permanent rate cut was hailed by public school groups as a cost-cutting measure that will allow them to keep more money in the classroom but criticized by conservatives as fiscally irresponsible. 

Currently, school districts must pay 20.96% of their payroll costs into the Michigan Public School Employees’ Retirement System, which includes funding for retiree health care, benefits and pensions. Senate Bill 911 would reduce school districts’ required contributions to 15.21%.

That is poised to happen in the upcoming fiscal year because of the new state budget that legislators finalized in June before recessing for the summer after passing an education budget with a one-year reduction. 

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But the legislation approved Tuesday would make that cut permanent, saving schools more than $615 million annually in the 2025-2026 school year and beyond. The bill would also eliminate the requirement that some employees pay 3% toward their retiree health care costs. 

State Sen. Darrin Camilleri, D-Brownstown Township, said in a speech ahead of the vote that the move will “put hundreds of millions of dollars back into the classroom immediately and for the long term.”

Democrats, who approved the legislation in what was the Senate’s second session day since passing the budget in June, began pursuing the legislation after a report showed the health care portion of the state’s educator retiree system is now fully funded on paper. 

But Republicans unanimously opposed the measure, arguing it could jeopardize the long-term health of the overall teacher pension system, which remains underfunded by nearly $30 billion.

“These costs are not going to go away,” State Sen. Thomas Albert, R-Lowell, said in a floor speech. “They're only being pushed down the road. And when they're pushed down the road further, you incur more interest costs. It's more expensive. It puts retirees’ benefits at risk. It takes money out of the classroom to help educate our kids. This is really bad policy.”

The Michigan Education Association union praised the legislation, however.

It “will provide much-needed financial relief to hardworking educators and help alleviate some of the economic pressures contributing to the shortage of qualified educators in our children’s schools,” MEA President and CEO Chandra Madafferi said in a statement after Tuesday’s passage. 

Under the new education budget negotiated between the Senate, House and Gov. Gretchen Whitmer’s office, school districts received a retirement contribution rate reduction for the 2024-2025 school year. But the budget deal did not include any increase in traditional per-pupil funding for traditional public schools, frustrating some education groups, who also complained about receiving less dedicated funding for mental health and safety. 

Charter schools, which generally do not participate in the retiree system, received a one-time boost in per-pupil funding.

Traditional public school leaders pushing for a permanent rate cut in retiree costs have said that without it, they cannot make future spending plans with confidence. 

Kenneth Gutman, Superintendent of Oakland Schools, said in a statement that he hopes Tuesday’s vote is “part of an ongoing effort to fix the long-term funding challenges that our public schools continue to face.”

Because of changes by the Senate, the bill must go back to the House for another vote before being sent to Whitmer for potential signature.

“We look forward to working with Gov. Whitmer and state representatives in the coming days and weeks to ensure final passage of this critical legislation,” Madafferi, the union president, said Tuesday. 

“Michigan students deserve to have the best and brightest educators working in their schools, and key to that is making sure we are providing teachers and school support staff the full compensation they have earned."