Great Lakes Wire

Public school districts in Michigan are set to spend nearly 6 percentage points less on employee retirement payments under new legislation that passed the Senate on a party-line vote of 20-16 on Thursday.

The bill, SB 911, reduces the debt obligation for the Michigan Public School Employees’ Retirement System (MPSERS) for school districts. This change mirrors adjustments made in the recent state budget and has received support from education groups after months of tension over funding the system.

When the K-12 budget was signed into law this summer, education groups criticized it for only providing lower retirement payments for one fiscal year. SB 911 makes this reduction permanent unless future legislation changes it.

The House will need to approve these changes before they can be sent to the Governor’s desk.

“The permanent rate reduction provides school districts with significant, ongoing, and predictable financial relief, empowering them to invest more resources directly into classrooms – directly benefiting their students, teachers and communities,” reads a statement from multiple education groups including the Michigan Association of Superintendents and Administrators, the Michigan Association of School Boards, and the Michigan Alliance for Student Opportunity.

The statement described Thursday’s Senate passage of SB 911 as recognizing “the decades of sacrifices made by Michigan public schools and their employees to pay down the MPSERS OPEB fund.”

Starting in 2026, SB 911 eliminates a 3 percent paycheck contribution to MPSERS that employees hired before September 4, 2012 had been paying for retiree healthcare benefits or other post-employment benefits (OPEB). For FY25, educators hired before fall 2012 will still pay this contribution but will later be reimbursed through a $181.5 million budget appropriation.

Under SB 911, public school districts' contributions to MPSERS would decrease from up to 20.96 percent of payroll expenses to around 15.22 percent starting in FY25. Previously, schools were spending nearly $21 on MPSERS debt for every $100 spent on an employee’s payroll.

Originally proposed reductions would have gradually decreased payment obligations over several years. However, changes introduced by Sen. Darrin Camilleri (D-Trenton), chair of the Senate PreK-12 appropriations subcommittee, expedited these reductions.

Overall, HB 5507 redirects $631.7 million from what would have been spent on MPSERS retirement benefits in FY25 School Aid Fund budget.

Despite MPSERS pension debt standing at $29.7 billion as of September 30, OPEB debt was reported as being funded at 126.9 percent.

“The Republicans you saw today voted against this $600 million going to local school districts forever," Camilleri said. "I don’t know how they can complain about school funding when we just sent back the most amount of school funding ever to our local school districts with this policy."

Camilleri views SB 911 as granting local school districts “autonomy” over decisions regarding teachers’ pay and classroom materials at a local level while maintaining state-level commitments without increasing per-pupil foundation allowances immediately.

Senator Thomas Albert (R-Lowell), who originally proposed maintaining minimum spending levels until debts are paid off completely, expressed concerns about Democrats undermining floor funding provisions meant for long-term sustainability.

Albert stated that although policy decisions about contribution rates do not affect system funding quality over time directly: “But the floor funding does,” he said accusing Democrats of redirecting funds away from addressing substantial pension debts which he believes will incur higher interest costs if deferred further into future budgets.