Lawmakers, education groups raise alarm after school budget passes ahead of retirement fund change

Rep. Matt Koleszar (D-Plymouth) speaks in support of Senate Bill 911 on June 27, 2024 | Anna Liz Nichols

While the Michigan Legislature voted to finalize its education budget for Fiscal Year 2025 early Thursday morning, delays on two pieces of legislation intended to free up funding for students are sparking concerns for funding.

Budget negotiations spanned from all of Wednesday to early Thursday morning before lawmakers approved $23.4 billion for K-12 schools, community colleges and higher education facilities.

For the first time in about a decade, the budget did not include an increase to per-pupil allowance, retaining the current amount of $9,608 per student. The budget did include a decrease in rates paid to the Michigan Public School Employees’ Retirement System (MPSERS), as part of an effort to redirect $670 million from the system into additional funding for schools, which Gov. Gretchen Whitmer’s administration said was freed up by paying off certain liabilities early.

The budget allocates $598 million in the MPSERS offset by reimbursing school districts, libraries and communities for about 5.75% of payroll costs and eliminates a 3% contribution to retirement healthcare required from some public school teachers.

While lawmakers approved the budget, legislation that would have permanently eliminated the 3% contribution requirement and decreased the contribution rate required from public schools.

Senate Bill 911 — introduced by state Sen. Kevin Hertel (D-St. Clair Shores) as a companion to Rep. Matt Koleszar’s (D-Plymouth) House Bill 5803 — passed the House early on Thursday, but was not transmitted to the Senate.

In a post to Facebook on Thursday , Rep. Samantha Steckloff (D-Farmington Hills) criticized Democratic House Leadership for not transmitting the bill, with lawmakers poised to break for the summer.

“Earlier today I proudly cast my vote for Senate Bill 911 that would have brought back between $400-$500 per pupil to our school districts. This historic funding would have provided districts with millions of dollars that were overpaid to our teacher retirement plans,” Steckloff wrote.

“Unfortunately, after almost 24 hours at the Capitol, a decision was made, without our knowledge, to not send the bill over to the Senate, killing all hopes for this critical funding. I’m extremely disappointed and angry that Democratic House leadership would do this to our caucus and our schools,” she wrote, later clarifying in another post that the funding would be included for Fiscal Year 2025, but not for subsequent years.

House Speaker Joe Tate (D-Detroit) later released a statement noting the House had passed a significant amount of legislation in the past several days, and that the clerk’s office was working on transmitting the bills.

“There is also still more work to be done with our colleagues in the Senate and with the Governor to determine the final version of MPSERS reform, but I am committed to continuing that conversation,” Tate said. “House Democrats enthusiastically voted in support of these bills because we know that the school employees who worked over the past several years to help cover the costs of retirement and met their obligation deserve to see those dollars back in their paychecks,” Tate said.

As the budget advances ahead of the MPSERS bills, some education groups have expressed uncertainty and frustration.

Robert McCann, executive director of the K-12 Alliance of Michigan, called the education budget “profoundly disappointing” criticizing the lack of additional funding per-student, significant cuts to school safety and wellness spending, and the one-time nature of the funding diverted from MPSERS.

“The additional dollars they put into it are done in a one-time fashion that makes them difficult to impossible, frankly, for districts to spend,” McCann said.

When Senate Bill 911 and House Bill 5803 were introduced, The K-12 Alliance of Michigan and 12 other education organizations s ent a letter to members of the House , calling for their support on the bills. On June 20, the coalition sent another letter to House lawmakers , calling on them to Advance House Bill 5803, which was listed on the chamber’s agenda.

“We made it very clear that the budget should never advance before the policy side of that MPSERS reform is done because that rate reduction has to get locked in in statute or that money is not guaranteed going forward. And that’s exactly what the problem is in this budget now,” McCann said.

Without that guarantee, schools can’t responsibly rely on that funding for things like staffing or ongoing student programming, McCann said.

“What we are asking them to do is get back to town and pass House Bill, 5803,” McCann said, noting that this version of the bill contained the language which the K-12 Alliance had agreed upon with the Legislature, including the 7% MPSERS reduction supported by the other 12 education groups pushing for the bills.

$83B state budget heads to Whitmer’s desk after all-night session

House Bill 5803 currently sits in the Senate Appropriations Committee, where it was referred after passing the House along party lines on Tuesday . Both the House and Senate have adjourned until July 30.

In a statement , Chandra Madafferi, president and CEO of the Michigan Education Association, applauded the elimination of the 3% health plan contribution, and the 5.75% payroll tax reduction.

“These changes respect the decade of financial sacrifices from both individuals and districts to fund a strong retiree health plan — and they keep Michigan on the track toward paying off the larger school employee pension unfunded liability by 2038,” Madafferi said.

However, Madafferi shared similar concerns on cuts to school safety and student mental health, and called on lawmakers to address these cuts with a supplemental budget upon returning from their break.

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