BAY COUNTY, MI — Bay County schools in the process of piecing together budgets for the 2012-13 school year are bracing for higher employee retirement costs after a reform bill failed to pass the Michigan Senate on Thursday.
The bill designed to overhaul the Michigan Public School Employees Retirement System passed by the House of Representatives on Thursday but Senate Majority Leader Randy Richardville, R-Monroe, said they needed more time.
“When we got in and talked about the details, the caucus looked at it and just wanted a little more time,” he said.
Under the current law, districts pay an amount equal to 24 percent of each employee’s salary into the pension fund, with that number expected to jump to 27 percent on July 1. The bill would cap that number at 24 percent.
In addition to the pension rate, the bill would also double health insurance premiums for school retirees; eliminate health coverage in retirement for new workers hired after July 1 and instead putting an extra 2 percent of their compensation into a 401(k) plan; and “prefund” retiree health benefits.
Bangor Township Schools and Essexville-Hampton Public Schools are both holding budget hearings next week and expect to approve budgets for the upcoming school year. Under the bill, Bangor schools would save more than $334,000, while Essexville would keep $277,000, according to a district-by-district analysis.
Essexville Superintendent John Mertz said reform is needed, especially considering the cuts many school districts have already been forced to make.
“The retirement reform is critical for all school districts and needs to be addressed,” Mertz said. “It would have been much more helpful if (the reform) passed.”
Educators now turn their attention to July, when the Senate could approve the bill after break. Bangor schools Chief Financial Officer Mark Orihel said the district is going to pass a budget with the higher pension contribution rate, and make changes if the bill passes.
“Last we know, our board assumes something may happen,” Orihel said. “They’re kind of waiting to see what happens.”
Bay City Public Schools Superintendent Doug Newcombe said some type of reform is needed.
“For school districts as a whole, thye’ve been seeing a significant increase on cost of retirement,” Newcombe said. “Quite frankly, we’ve been cutting here for 10-plus years. We’ve really gotten down to bare bones.”
The district would stand to save nearly $1.3 million if the bill passes. Bay City’s Board of Education could approve its budget at the July 25 meeting.