MMA: State Budget Update: Teachers’ Retirement

...from today's MMA Legislative Bulletin

State Budget Update: Teachers’ Retirement

As the Appropriations Committee works to finalize the state budget, amendments are offered by various Committee members, either individually or in teams, to help close the budget gap. After being reviewed, those amendments are either “moved in” or “moved out” of the budget document according to votes of the full Committee. From an observer’s point of view, the tail end of the process, when the ad hoc amendments are flying, represents the least predictable or organized part of the budget development process.

On Thursday this week, the Committee apparently “moved in” an amendment to the provision in the budget regarding the creation of a “streamlining commission”. Two weeks ago, the Governor submitted a number of budget proposals that were designed to close a $440 million hole in the biennial budget created by the most recent reprojection of state revenues. One of those proposals was to create a commission made up of Appropriation Committee members and state agency commissioners that would be charged with finding $37 million worth of savings over the biennium by streamlining the operations of state government.

The Appropriations Committee’s new amendment to that proposal is to also charge the commission with the new specific task of identifying what amount of the state’s contribution to school teacher retirement premiums should be included in the calculation of the Essential Programs and Services (EPS) school funding model. If that occurs, obviously, the costs of funding some of the teacher retirement premiums, for the so-called “normal costs” and possibly the “unfunded actuarial liabilities”, would be transferred from the state level to the property tax level.

No rational school system in modern times would establish a retirement system along the lines of the defined benefit model which the Legislature has been providing for school teachers. The size of the unfunded liabilities that have accrued under that plan are breathtakingly enormous, in the multi-billion dollar range. This new charge to the “streamlining commission” to determine what amount of that financial liability, “if any”, should be moved into the EPS school funding model represents a step toward shifting to the property taxpayers the financial liabilities associated with a benefit the Legislature chose long ago to bequeath to a favored constituency.