Michigan Education Committee Urged Not To Pass Proposed Retirement Bonus

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DETROIT, Mich., March 12, 2009 – Detroit Renaissance, a private, non-profit leadership organization dedicated to accelerating the region’s economic growth, announced today its opposition to the “retirement bonus” plan proposed recently by the Michigan Education Association (MEA). Fiscal analysis done by the state and Anderson Economic Group shows the plan could add over $2 billion to the state’s retirement debt. In addition, the proposal will add costs to school districts from year one unless there is a reduction in districts’ operating costs equivalent to eliminating over 1,700 MPSERS jobs.

“We have focused for the past year and a half on trying to encourage the Governor and legislature to enact significant budget reforms that would get our fiscal house in order,” said Doug Rothwell, president, Detroit Renaissance. “We are facing at least a 2.5B deficit in the next two years alone. The retirement bonus proposal would set these efforts back further.  At a time when the state can least afford it, this plan adds to the deficit and sets back reform by adding to employee entitlement expenses. Detroit Renaissance strongly opposes this proposal.”

The purpose of the proposed plan is to incent teachers to retire early. The plan is supposed to save the state money by replacing senior, higher wage teachers with younger, lower-wage teachers. However, Detroit Renaissance argues that full replacement of retired teachers and increased pensions for retirees would erase all savings from inducing teachers to retire early.

Under the proposal, the average additional pension benefit per year would be $9,924 per retiree with 30+ years of experience for the duration of the benefit, likely 20 years. For retirees with fewer years of service, the average annual additional benefit would be $6,168 per retiree per year.

However, any cost savings resulting from higher-salaried retirees being replaced with lower-cost new teachers would be compromised by an estimated additional cost of $1.2 billion over 25 years to provide higher pensions. Also, there is an estimate of $1 billion over 25 years to account for higher pensions of retirees and the salaries of replacement teachers.

About Detroit Renaissance:
Detroit Renaissance provides leadership to accelerate the economic transformation of Detroit and Southeast Michigan. Renaissance accomplishes this work through serving as a catalyst to develop growth strategies, advocating for those strategies and championing specific initiatives that accelerate growth. A 501(c)(3) organization that was formed in 1970, Detroit Renaissance is composed exclusively of the chief executive officers of the region’s most significant employers and universities that generates over $800 Billion in annual revenue, provides nearly 300,000 jobs and serves over 130,000 students in Michigan. For more information, visit www.detroitrenaissance.com.

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