Education funding has figured prominently in the Michigan gubernatorial race, says fiscal analyst James Hohman, but not for the reason one may expect. In a piece in the Port Huron Times Herald, Hohman, who is assistant director of fiscal policy at the Mackinac Center for Public Policy, argues that the state’s education funding problems are due to the underfunding of the state school system’s retirement plan.
According to the report, the system’s retirement plan is underfunded by almost $26 billion, approximately 13 times Michigan’s general obligation bonds. The annual required contributions were $989 million in 2009, but rose to $1.9 billion last year and are expected to increase further to $2.3 billion by 2016.
And those required contributions are more than a chunk of change — they eat into the fund itself, with 85% of all retirement contributions devoted to addresses the underfunding. And the state spends more on the education system retirement underfunding that it does on the Michigan prison system.
According to the report, the system’s retirement plan is underfunded by almost $26 billion, approximately 13 times Michigan’s general obligation bonds. The annual required contributions were $989 million in 2009, but rose to $1.9 billion last year and are expected to increase further to $2.3 billion by 2016.
And those required contributions are more than a chunk of change — they eat into the fund itself, with 85% of all retirement contributions devoted to addresses the underfunding. And the state spends more on the education system retirement underfunding that it does on the Michigan prison system.
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