This article was originally published in Michigan Advance.
Updated on September 17
On Tuesday, the Michigan Senate passed a bill along party lines to permanently eliminate the 3% tax that some public school teachers pay into a retirement plan.
SB 911, sponsored by Sen. Kevin Hertel (D-St. Clair Shores), already won House approval in late June as the Legislature was finalizing an $82.5 billion budget for fiscal year 2025.
“This is a major investment in public education,” Hertel told the Michigan Progress on tuesday. “I would say it’s a transformative development, and if we can get this done, hopefully we can continue to build on that increase per student year after year.”
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The fiscal year 2025 budget, which takes effect Oct. 1, was the first in nearly a decade to not include an increase in the per-pupil aid budget in the School Aid Budget, which remained at $9,608 per pupil.
However, it did include a cut in rates paid to the Michigan Public School Employees’ Retirement System (MPSERS), allowing the Democratic-led Legislature to redirect $670 million from the system into additional funding for schools, which is what Gov. Gretchen Whitmer’s administration originally proposed when it rolled out its $80.7 billion budget bill in February.
The bill passed by a vote of 20-16, with all Democrats voting in favor and all Republicans present voting against. Senators Rick Outman (R-Six Lakes) and Jim Runstead (R-White Lake) were excused.
Hertel said he was disappointed he did not receive support from his Republican colleagues.
“I’m a little shocked by it because we’re talking about freeing up $600 million across the state in our school districts,” he said. “And for the teachers who are paying the 3% for the pension portion, you’re talking about putting those dollars back into their paychecks. So I was hoping that we would get some support across the aisle. This is a game changer. It’s going to fix a systemic problem in the way we fund our schools.”
The bill was a replacement proposed by Sen. Darrin Camilleri (D-Trenton) that contained a previously passed House version sponsored by state Rep. Matt Koleszar (D-Plymouth). It automatically codifies a 5.75% payroll rate cut beginning in FY 2026, which Camilleri said, when combined with the FY 2025 budget, will make those savings permanent and “put hundreds of millions of dollars back into the classroom immediately and over the long term.”
That sentiment was shared by Al Latosz, director of Algonac Community Schools and president of The K-12 Alliance of Michigan.
“We are grateful to the Michigan Senate for engaging in an ongoing dialogue with educators about the importance of responsibly and permanently reducing these decades-old debt payments that have been forced upon our schools and students,” Latosz said. “The passage of SB 911 will free up hundreds of millions of dollars annually that Michigan schools can invest directly in the programs that support the needs of our students.”
Republicans, as they have from the plan’s inception, worried about the long-term damage the legislation would do by not fully funding future pension debt.
“If you don’t meet your obligations, it has long-term consequences,” said Sen. Thomas Albert (R-Lowell). “It makes it harder to fund education in the future, and it makes it harder for us to make sure that we can pay our retirees the benefits that they’ve earned and are constitutionally protected.”
Senate Minority Leader Aric Nesbitt (Porter Twp.) also voiced his opposition.
“The bill before us is everything that is wrong with government,” he said. “A cynical money-making scheme whose victims will not know about it until the thieves are long gone from this building. Another empty victory for tax collectors over taxpayers. A raw deal that has been polished to look like a good deal. A shameless attempt to fool people, the same people who educate our children. This bill is theft, pure and simple.”
Hertel said he was astonished by this characterization.
“I think you could call it theft if we continue to take 3% of teacher salaries and take that money from school districts and put it into the health care side of the pension fund, which is now over 140% funded,” he said. “I don’t understand why we would continue to put money into a fund that the experts tell us is well funded when that money could be doing the work it needs to do in our classrooms and flowing back into teacher salaries in our state.”
Sen. Dayna Polehanki (D-Livonia), chair of the Senate Education Committee and a former teacher for 20 years, shared that view from the Senate floor in support of the bill.
“So in this year’s state budget, we reduced MPSERS payments, which resulted in an additional $600 million in state dollars going directly back into our schools. That’s the average equivalent of about $400 per student across the state. We also implemented a 3 percent pay raise for teachers hired before 2012 by removing the requirement to pay into this fully funded system,” she said. “This bill will give school districts more flexibility in deciding how to use these excess funds, including but not limited to investing in student mental health, school safety, higher teacher pay, more staffing, and specialized academic interventions to meet unique school needs.”
According to Hertel, the legislation will forever lock in savings for school districts.
“They can plan their budgets because of these savings and now they know it’s ongoing so they can use those dollars to plan year after year,” he said.
The legislation now heads back to the House for a final vote, which Hertel expects will be next week. If it passes, it will go to Whitmer for her signature.
The Michigan Advance is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. The Michigan Advance maintains editorial independence. Contact Editor Susan J. Demas with questions at info@michiganadvance.com. Follow the Michigan Advance on Facebook and X.
