Article published Sep 14, 2006

Phil Power

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.

If passed, K-16 would require the state 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.

Called by its proper name, stripped 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 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 3 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 teachers' 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 percent of school payrolls statewide. Today, the retiree cost is 17 percent and growing rapidly. According to projections by the nonprofit, nonpartisan 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 schools 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." The Citizens Research Council also suggested — fruitlessly, it turns out — a bunch of reforms at the local level 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. But nothing happened and, the way it now stands, 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.

In fact, 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 nor 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 for a juicy perk, one that no private sector company can afford. And 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 is also the founder of The Center for Michigan, a moderate think-and-do tank. These opinions and others expressed in his columns are his own and do not in any way represent official policy positions of The Center for Michigan. Phil would be pleased to hear from readers at ppower@hcnnet.com.