| Pension & health care reform to help education |
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May 21, 2010
A key component of our ongoing efforts to transform Michigan's economy is educating our children so they can compete with anyone else in the world. Education is the most important, long-term strategy for diversifying Michigan's economy and for fostering entrepreneurship and creating jobs. We've had difficulty in adequately funding K-12 schools in Michigan partly because of a structural deficit in the state School Aid Fund. A structural deficit is when costs continue to outpace revenues.
Back in January, I proposed 29 reforms to Michigan government that included changes to pension and health-care benefits for public school employees. These pension and health-care reforms would help to resolve the structural deficit in the School Aid Fund, and they were included in my state budget recommendation that I presented to the Legislature in February.
Earlier this week, I signed into law two bills that implement these reforms. And they accomplish several things.
First, public school employees who choose to retire between July 1 and September 1 of this year will receive a slightly enhanced pension. About 56,000 school employees are eligible to retire between those dates
. It's estimated that about half of those employees - about 28,000 - will choose to retire. And this will create thousands of job opportunities for new college graduates who are eager to teach in Michigan.
For school districts, the retirement costs for new school employees who are hired on or after July 1 this year will be less. That's because these employees will be placed into a new, lower-cost retirement plan that's a combination of both a defined benefit and a defined contribution plan.
Also beginning July 1, all employees who are members of the Michigan Public School Employees' Retirement System will contribute 3 percent of their pay to an irrevocable health-care trust.
Together, reforms to the public school employees retirement system will save school districts nearly $680 million in the next school year. Over the next 10 years, the savings will grow to more than $3 billion.
In the short term, the money saved by these reforms, combined with favorable revenue projections for the School Aid Fund, means that we will not have to cut K-12 funding in the upcoming fiscal year. And over the long term, these reforms will help us fund education at the level needed for our children to succeed in a global economy.
Thank you for listening.
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