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Report: Pension shortfall eats into Michigan teacher salaries

Teachers in the Detroit school district recently participated in a training session on gifted education.
Teachers in the Detroit school district recently participated in a training session on gifted education.
Kyla Heat/Chalkbeat

Michigan teachers are being paid less for the same work — despite increases in state funding for education.

But don’t blame the schools.

The struggling teacher pension fund has eaten up most of the recent funding increases, leaving little left over for teachers, according to a new report from the Citizens Research Council, a nonpartisan think tank in Michigan.

While Michigan’s average teacher salary of about $62,000 ranks 13th nationwide, it has declined in recent years when accounting for inflation.

Researchers generally find that higher pay helps schools attract and keep better teachers, which directly benefits students.

Educators contribute a chunk of their paychecks to the pension fund; in return, they get a pension payment and healthcare coverage after they retire.

School districts also must pay into the pension fund. The pensions are guaranteed by the Michigan Constitution.

To help cover costs, money in the pension fund is invested in stocks, bonds, and real estate. State policymakers anticipated an 8% annual return, but by 2014, the fund had fallen short of that mark, in large part because of investments that went bad during the Great Recession.

Recent increases in state funding for schools were largely used to bolster the fund, known as the Michigan Public School Employees’ Retirement System.

Meanwhile, the average teacher salary fell by 10% over the last decade, adjusting for inflation. The portion of education spending that went to salaries also declined.

“The outlook for Michigan’s teacher salaries is gloomy,” the report says. “They have fallen victim to a crowding-out effect arising from the requirements to meet pension obligations.”

Read the full report below.

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