Education A State Capitals Roundup

Costs for Retirees to Rise, Michigan Report Cautions

By David J. Hoff — October 26, 2004 1 min read

Michigan school districts will need to dramatically increase their payments for retirees’ benefits over the next decade, a report suggests.

To keep up with demand by fiscal 2008, districts will need to pay at least 20 percent of their total payrolls into funds that provide pensions and health benefits to retired teachers, according to the Citizens Research Council of Michigan. The share will rise to 30 percent of payroll in the following 10 years, the Lansing-based nonprofit group said.

Districts now pay 15 percent of payroll to cover the pension and health-insurance costs of their retirees.

“The outlook is decidedly gloomy,” Tom Clay, the group’s director of state affairs, said in a statement.

The retirement system is struggling because health-care costs are rising, and the pension fund has had a poor rate of return in recent years, the research council said.