$17.9 Billion Loss Motivates a Call for Change

The recent proposal by Governor Granholm which includes changes to MPSERS, the Michigan Public School Employees' Retirement Plan is motivated by one simple fact, the plan is in trouble.

The current MPSERS 2009 Audit shows that the pension fund has lost over $17.9 billion over the last three years. What's worse is the funds audit hides just how bad the situation is by employing a "smoothing" technique which mitigates the impact of losses. Utilizing the current asset base against the total unfunded liabilities the funded ratio drops from 83% to 63% Other dynamics are working against the system. 1) The rate of retirees is growing, while the rate of new employees is declining, 2) the assumptions underlying the "health" of the system are barely hitting 1/2 of the projected rate (4.2% return over 5 years versus projected rates of 8%), 3) the required rate of contribution needed to amortize the unfunded liability of obligations is billions lower than the actual rate, 4) the pool of money dedicated to funding the pension obligations (the school aid fund) has shown dramatic decreases which will negatively impact total employment in the system. Read the full audit here if you'd like to download directly. MPSERS 2009 Audit