Fix the Damn Pensions!

Michigan’s roads aren’t the only thing in a state of crisis.  Here in Michigan, our public school teachers’ pension plan is currently underfunded by about $40 billion, requiring huge annual investment just to keep up and ensure teachers receive their retirement benefits.

As the public demands that every tax dollar they pay at the pump go to fund road repairs, policymakers are left with a dilemma.  Today, roughly $540 million in sales tax paid at the pump doesn’t go to roads – it goes to the school aid fund to help pay for those teacher pensions.

What’s a legislature to do?  Michigan Freedom Fund Chairman Greg McNeilly endorses one creative idea in today’s Detroit News that would better fund teachers’ retirements, while increasing investment in the roads:
“The state has a $40 billion pension liability on which it is making deposits. Bonding for $10 billion and pumping that money into the pension fund immediately increases the assets in the pension fund, and dramatically lowers payments on the remaining liability.
“When the state adds up the combined payments on the $10 billion bond and the $30 billion pension fund, it saves taxpayers and improves cash flow by about a billion dollars each year. It also finally puts the state on the hook requiring that it meet its obligation to our retired teachers, something that hasn’t happened before.”
As an added bonus, the plan would allow the state to reinvest that $540 million in annual sales tax payments at the gas pump directly into road repairs, while increasing school funding by over $400 million per year.
It’s a creative solution to a pair of serious problems.  Fix the damn roads?  Sure.  But fix the damn pensions, too.

Tony Daunt
Tony Daunt
Executive Director
Michigan Freedom Fund

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