City PTSA - Welcome

The Citizens Research Council of Michigan (CRC), which has done independent, nonpartisan public policy research for 90 years, did an analysis, a summary and fiscal impact report for each proposal presented to voters on November 7. The reports are available at www.crcmich.org/election/. If you didn't know this before the election, you may ask of what value these reports would be after the fact. The Proposal 5 reports are of value because in the analysis, background information is given on how the basic and maximum foundation allowances were set, how the gap in school funding continues, how basing funding on current enrollment benefits growing districts and how the Michigan Public School Employees Retirement System (MPSERS) was and is funded.
Before Proposal A, the State of Michigan shouldered some of the responsibility for the total contributions to MPSERS. After Proposal A, the local school districts and intermediate school districts became fully responsible for the total contributions to MPSERS.
Contrary to advertising put out by the opposition of Proposal 5, the increasing cost of the retirement fund contributions is due to a series of events and certain factors that employers all over the state have little control over.
Originally, the health care portion of the MPSERS fund was "pre-funded". This means there was a reserve of hundreds of millions of dollars to help buffer the system based on projected future claims from an actuarial analysis.
During the Engler Administration this reserve was removed from the MPSERS fund and the money was placed in the General Fund of the State.
This transfer of funds was found to be unconstitutional by the State Supreme Court. However, the court could not order the legislature to return the funds. Therefore, without the reserve, the health care portion of MPSERS is now based on a "pay-as-you-go" or cash disbursement basis. One can only speculate how the districts’ mandated contribution rate for meeting the retirement health care cost would be different if the reserve had been left in place.
The local and intermediate school districts have seen a rise in the mandated retirement contribution rate for active employee payrolls from 10.8 percent in 1999 to 17.74 percent for 2007. According to the CRC, factors that have contributed to this increase are weak performance of investment holdings of the retirement system in 2001 and 2002, the increasing costs of health care for retirees and their beneficiaries, the general flattening of employee payrolls, and the rising number of individuals eligible for retiree health care benefits.
As of September 30, 2005, MPSERS had a membership total of 488,049. Of this number 321,057 were active employees, 15,286 were vested inactive employees and 151,706 were retirees and beneficiaries. Given that the number of retirees and beneficiaries is almost half the number of active employees, it is understandable how rising health care costs are impacting the MPSERS fund. Without the reserve and a much larger percent of active employees than retirees, the cost of fulfilling the commitment made to the employees continues to rise. The CRC projected that by the year 2020 the rate of payroll to cover the MPSERS contribution rate would be 30.15%.
The per pupil foundation allowance that is paid to schools under Proposal A is supposed to cover the retirement costs. But the increasing cost of health care, the increasing number of retirees and the rising unfunded accrued liability for retiree pension benefits are factors the districts and the unions have little control over. For that matter, employers across the state have little control over such factors.
Some of these factors will need to be addressed by our legislators. Proposal 5 was originally a bill that was placed before our legislators. The bill ended up being referred to the Education Committee and was not discussed, debated or acted upon for a final vote by the legislators. So, the people took matters into there own hands, as is their right as citizens, and started an initiative process to acquire the necessary signatures needed to place the statutory initiative back in front of the legislature. The legislature did not enact the initiative, so it was placed on the ballot. We all know the outcome of Proposal 5. But how will our legislators address the issues that brought 10,000 people to Lansing on June 16, 2005? The 10,000 came to Lansing to impress on our legislators that the way our state finances schools is in dire need of their attention and their strength to enact positive and equitable change. Forty-one students in a high school math, science or history class is unacceptable, yet some districts face this reality. The legislators passed higher graduation standards, yet the inequity in funding of districts still remains. The inequality in district funding and the numerous factors still unaddressed can cause great disparities in the graduation success of our students.
The House legislators have before them in the "lame duck" session four bills that were passed by the Senate in 2005. These bills would create the “School Employees Health Benefit Act”, which tries to address the rising health care costs for school employees. These bills are also tie barred together so all must pass or none will pass. If you are wondering the details of these bills, you can go to www.legislature.mi.gov and type in the bill numbers 895 to 898. You can then read the summary reports as reported from the House Committee and as passed by the Senate. Each gives the fiscal impact of the bills, and the bills details. If you want to cut to the quick, the House Committee summary gives supporting and opposing arguments, which are good to read before diving into the details. Whether this is good or bad legislation, I will not comment. My question is why have these bills sat for a whole year in second reading status in the House? Could action on these bills prior to the Proposal 5 vote changed the outcome of the vote? Would these bills have addressed the rising cost of retiree health care benefits and there by disarming the main argument of Proposal 5’s opposition? I guess I will have to email my House representatives on those points.
I urge you to peruse the websites mentioned above. The CRC report has a very good background piece on the per pupil foundation allowance. It explains how the basic and maximum foundation allowances were set. It is one of the simplest explanations I have found. Knowing the history of the issues helps us to try and affect change through our legislators. Hopefully parents, staff and students at City will band together for equitable change.

by Sara Potyraj