Saturday, May 15, 2010

Fallow Fields of Education

How badly akilter must things be in Michigan for the state to even consider encouraging otherwise productive employees to become unproductive? However bad it must be, we have arrived.

The short term benefit in luring employed teachers into the ranks of the retired is being estimated at $700 million. That is a huge chunk of money that would go a long way toward closing the state's looming budget deficit.

The teachers are being lured with a small retirement bonus while those staying behind will be subject to paying higher employee contributions for benefits packages. Most of the remainder of the estimated savings will be garnered with new replacement teachers being hired at lower wages and reduced benefits.

The opportunity to shave huge annual amounts from today's budgets sounds like a good deal for taxpayers. However, in twenty years, after most of these newly retired teachers have collected two decades worth of state provided retirement and with legions of new teachers in the system who replaced those retired, is the benefit to the state as spectacular as it is being projected?

I profess ignorance in the plan's total impact as I have not studied it. Fiscal reality would have to suggest that higher teacher contributions is a good thing regardless of whether the early retirements were incentivized or not. Fiscal reality would also suggest other items that are not being seriously looked at.

A person that reaches the labor market at age 25 (late for most of us) would have to put in 40 years before reaching Social Security's magic number of 65 years (early for many more.) Yet we have many thousands of teachers each year reaching an early retirement age long before either that magic 40 year threshold or the age of 65 have been reached.

While luring many teachers into the retirement ranks early will help in the short term (and indeed might even help over the long term,) an ultimate solution to the problem will not be achieved until a systemic change is enacted--a change that resolves to put Michigan's teachers pay and benefits more closely into line with that of the national average.

It is a solution that the unions will not like and it is a solution that politicians might find difficult to enact. Until then, I suppose, paying productive people to become unproductive is the best solution.

1 comment:

Hershblogger said...

You may find these Detroit news articles of interest. They used to have an interactive calculator, by district, showing pension costs. However it's been removed or is now a "pay to play" item.

Michigan's education time bomb: Costly, loophole-ridden retirement system threatens public schools
http://detnews.com/article/20070510/SCHOOLS/705100442/Michigan-s-education-time-bomb--Costly--loophole-ridden-retirement-system-threatens-public-schools

The $1,470-an-hour loophole: Retirees work for 13 days to earn lifetime health care
http://detnews.com/apps/pbcs.dll/artikkel?Dato=20070511&Kategori=SCHOOLS&Lopenr=705110408&Ref=AR

Politics stall school retiree reform
http://detnews.com/apps/pbcs.dll/artikkel?Dato=20070512&Kategori=SCHOOLS&Lopenr=705120386&Ref=AR

Retire-rehire move costs millions
http://detnews.com/article/20070511/SCHOOLS/705110415/Retire-rehire-move-costs-millions

Employees buy time, state pays
http://detnews.com/article/20070511/SCHOOLS/705110416/Employees-buy-time--state-pays

It's much worse than "paying productive people to become unproductive." That's already accomplished.

This new proposal ultimately only makes it worse. But, since it's "for the children," I guess they might as well pay for it.