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DON'T GET JIVED BY PROPOSAL 5: K-16 school funding plan is a cynical shell game that won't help kids


By Phil Power - September 14, 2006

As you flip through the channels these days, you're likely to see ads featuring cherubic and hopeful faces in classrooms, with an announcer solemnly intoning phrases like, "we cannot compete in a global economy unless we dramatically improve education."

Sounds pretty good, doesn't it? It's an attempt to sell you on the so-called "K-16" initiative that will appear on the November ballot as "Proposal 5."

If passed, K-16 would require the State of Michigan to provide annual funding increases to match inflation to local public elementary, middle and high schools, intermediate school districts, community colleges and universities.

Early polls show solid support: 65 percent in favor, 25 percent opposed, 10 percent not sure.

But unfortunately, the amendment isn't really about teaching at all. Instead, it's mostly about requiring taxpayers to pick up the rapidly increasing costs of school employee pensions.

Sripped of all the cynically misleading verbiage, K-16 really should be renamed "No school retiree left behind." And should this turkey pass, K-16 would have two extremely bad consequences for Michigan.

First, it would take the pressure off local school officials, school boards and local voters by shifting responsibility for tough financial decisions to the state government.

Second, most of the new dollars K-16 is supposed to produce for kids' education will be gobbled up by school employee pensions.

What we are really looking at is a shell game.

Yet it is one with a powerful come-on. The spin revolves around the superficially attractive idea that schools, community colleges and universities should be guaranteed annual increases equivalent to at least the inflation rate. (Now about three percent.) The suggestion is that the money will go to more teachers, smaller classes and so forth.

But that's not where most of it would go.

The biggest allocation comes from clever language that caps local districts' contributions to pensions for retired teachers and school employees.  Mind you, it doesn't cap the pensions . . . Just what the local folks will have to pay.

Who pays for the uncapped increases in pension costs?

The state, meaning you, the taxpayer.

Back in July, the Senate Fiscal Agency, the bean-counting arm of the state senate, estimated a first year total price tag of $566 million if the K-16 measure were approved. Of this, $372 million (nearly two-thirds of the total!) would go directly to school retirement funds. Nobody I've talked to, including supporters of the K-16 proposal, disputes this analysis, by the way.

The reason school boards, superintendents and teacher unions are so hell-bent on shifting so much of their local liabilities to the state is because costs of retiree health care and pension benefits are eating them alive. In 1991, the cost of school retiree pensions and health care equaled about 11 per cent of school payrolls statewide.

Today, the retiree cost is 17 per cent and growing rapidly. According to projections by the non-profit, non-partisan Citizens Research Council of Michigan, for every dollar paid to working school employees in 2020, the taxpayers will have to fork over 32 cents for retiree health care and pensions.

It's not as though this problem should have surprised anyone paying attention. Back in 2004, then-Michigan School Superintendent Tom Watkins warned the state Board of Education that "Combining increased pension contributions and health benefit costs for working employees leaves little room for increased spending directed to teaching and learning even if the economy improves."

Citizens Research Council also suggested - fruitlessly, it turns out - reforms that would help blunt the problem. These included lowering pension benefits for all new employees, greatly tightening costly early retirement benefits, increasing employee contributions for pension and health care and greatly tightening rules for retiree health care.

Some education groups note that local school districts can't make those reforms because school employee retirement plans are governed by state law. So, their argument goes, the state should pay the pension freight for local school employees because the state sets the rules for the pension system. They say it's not fair for the state to set the rules and then pass all the costs on to someone else. And they say the state perpetrated a nasty wrong on local districts more than a decade ago when a little-noticed provision in Proposal A first passed all those pension funding responsibilities from the state down to the local districts.

But adopting K-16 would just add to the pile of bad public policy without dealing with the root problem. K-16 would pretty much allow local districts to throw the ticking time bomb of school employee pensions back into the state capitol and plug their ears when the bomb goes off.

The reasonable answer, then, is for all parties involved - teacher unions, school administrators, local school boards and the Legislature - to openly acknowledge the pension crisis and work together on reforms. At the end of the day, K-16 as proposed is an avoidance tactic misrepresented as something that helps kids.

And, until there is reform, a Michigan school employee can work as few as five years to qualify for full health benefits upon retirement! Even the few remaining optimists at the United Auto Workers union, not to mention the automakers, would turn white at that kind of juicy perk.

Even some of the proponents of K-16 admit in private that they never expected the measure to wind up on the ballot.

They figured they could put enough public pressure on the legislature and governor to get them to cave in without resorting to an initiative. Remember, they turned out nearly 12,000 demonstrators on the Capitol grounds for the purpose last June.

But neither Gov. Jennifer Granholm or the legislature buckled, if only because it would be terribly irresponsible to require unending, built-in inflation increases for anything, even education.

So where does leave us?

Only with the familiar, sickening feeling that once again, entrenched special interests are sneakily trying to snag public financing. This time, they have the gall to pretend it's all for the kids.

For shame!

Phil Power is a longtime observer of politics, economics and education issues in Michigan. He would be pleased to hear from readers at ppower@hcnnet.com. These opinions and others expressed in Phil Power's columns are individual opinions and do not in any way represent official policy positions of the Center For Michigan.


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