Editorial: Incentive for Teachers to Retire Doesn't Add Up

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Incentive for teachers to retire doesn't add up

BY HOWARD HEITZEG • FEBRUARY 12, 2009

Free Press

To avoid balancing the state's out-of-whack budget, the Michigan Education Association lobbyists and a group of legislators have come up with a way of spending money they don't have.

The MEA is proposing to offer an incentive to teachers to retire. The proposed incentive for a teacher with experience of 30 years or more and a three-year average salary of $75,000 is about $12,000 annually over the current pension amount. This proposed $1,000 per month will continue for the remainder of their lives. (The MEA insists the average retirement increase would be $500.) How does this proposal help local districts?

Teachers' rate of pay is mostly based on how long one has worked, even though everyone has basically the similar work, working conditions, hours, etc. New teachers start at around $35,000 per year, though it varies by school district, and those at the top of the scale receive around $75,000.

So if one could replace the high-priced veterans with the cheap new kids, there would be a huge savings -- a $40,000-per-year savings in this example. So what's wrong with this plan?

We need a little more data. The experienced teacher in this example would have her annual retirement pay go from $33,750 to $45,000 annually. The $11,000 increase is nice but hardly enough to entice me to sell my $75,000 job to obtain it unless I have another job lined up or my brokerage account has done better than most during the past year. This will turn out to be a nice boost for those who were going to retire anyway, but not enough incentive to get most out the door.

But let's suppose I'm wrong, and many teachers take advantage of the program. What will the program really cost? Remember, we aren't just paying the teacher in the example the incentive but the whole retirement amount of $45,000 annually. Now that big $40,000 savings in our example doesn't look so hot, does it?

Who pays for the flood of teachers drawing retirement benefits, including health care? Well, the retirement system, of course, and I'm guessing the folks in Lansing figure this is free money just lying around waiting to be paid out to the newly minted retirees.

Guess what? The retirement system has to be financially sound, and if it isn't, the state requires local districts to pick up the tab to make it so. The big savings on the front end might just go out the door on the back end. To put it another way, a $75,000 teacher has been replaced by a $35,000 teacher and a $45,000 retiree.

The real winner in this game is the MEA. Already the union faces a loss of income from union dues next year because a downturn in student enrollments will require fewer teachers. Should financially strapped districts reduce staff further, the MEA will have an even larger dues shortfall.

New teachers must pay the same rate of union dues as experienced ones. So if the union can find a way to flush out the expensive ones and replace them with more of the cheaper newbies, the MEA stabilizes its union dues. The potential raid on the retirement fund is not the MEA's problem, but it is a problem for the school districts, and ultimately taxpayers.

This plan either won't work, or it will work too well. Our lawmakers should stop listening to union lobbyists with schemes to raid the retirement fund and concentrate on getting the budget done the right way.

HOWARD HEITZEG is a retired superintendent for the Waterford Schools. Write to him in care of the Free Press Editorial Page, 615 W. Lafayette, Detroit, MI 48226 or at oped@freepress.com.