House Dems: Bonding against MPSERS is fraught with financial peril

$20 billion cost to extend pension payments is fiscally irresponsible
Friday, September 6, 2019

LANSING — A group of House Democrats announced today they are opposed to bonding against, or reducing scheduled payment to, the state’s pension system for school employees, known as MPSERS. 

A recent study released by conservative economist and former Deputy Treasurer Patrick Anderson estimates that there is at least a 50 percent chance the state loses money if it bonds against MPSERS. 

“Bonding in an attempt to beat the market is fraught with financial peril,” said state Rep. Julie Brixie (D-Meridian Township). “I don’t even know why anyone is talking about it after the most conservative economic group showed the state has about a 50/50 chance of making money, and an almost 30 percent chance of losing $25 billion or more. It’s a fiscally reckless gamble that jeopardizes existing K-12 education and road funding.”

The group also opposes a plan floated by the same organization to reduce scheduled payments to the pension fund over 10 years, which Anderson’s newly released study warns would cost the state $20.4 billion.

“It’s fiscally irresponsible not to pay your bills,” said state Rep. Kara Hope (D-Holt). “Delaying our scheduled payments simply steals future classroom funding by increasing pension costs by over $20 billion. It’s a problem, not a solution. We need an honest solution to fix our roads after decades of failed leadership.”

The group pressuring lawmakers to gamble with the state’s school employee pension system is the West Michigan Policy Forum, led by former Republican Speaker Jase Bolger who unsuccessfully pursued similar plans while in office.

“This is nothing more than a DeVos-backed scheme to cripple the public school retirement pension system under the false pretense of fixing the roads,” said state Rep. Sheryl Kennedy (D-Davison), a former school administrator. “They want to strip our public school employees of a secure retirement so they can recruit the best and brightest educators away from traditional public schools and bolster their profit margins.”

The House Democrats pointed out that Gov. John Engler and the Legislature dramatically cut MPSERS payments in the 90s to fund other priorities. A problem that Gov. Snyder and previous Legislatures have since begun to correct by implementing a payment plan through 2038.

“We’ve seen this story before. Gov. John Engler did essentially the same thing in the 90s, which jeopardized the long-term fiscal health of MPSERS,” said state Rep. Cynthia A. Johnson (D-Detroit). “Let’s not make the same mistake again because all we’re doing is creating a mess for future lawmakers and governors to clean up.”

Senate Majority Leader Mike Shirkey compared reducing payments to the pension fund to refinancing your home, but state Rep. Lori Stone (D-Warren) argues it’s more akin being misled by a used-car salesman. 

“It’s like buying a used car with 170,000 miles on the end of its life and the salesman convinces you to take a six-year loan because the monthly payment is lower,” said Stone, a former teacher. “You will be making payments long after the car dies. Reducing MPSERS payments would tie up and divert funds for decades, instead of paying down the pension debt, ultimately costing taxpayers more money in the end.”

House Dems also highlighted the real-world impact this gamble would have. State Rep. Nate Shannon (D-Sterling Heights), a former teacher, spoke about how this could put people’s retirement in jeopardy. 

“This is a solution in search of a problem,” said Shannon. “The pension fund is in a decent position and is on track to be fully funded by 2038. Gambling on the livelihood and retirement of 443,000 Michigan families when the system is healthy is morally bankrupt.”

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