Washtenaw Community College considers converting part-time faculty to contract employees to avoid state pension contribution
Washtenaw Community College President Larry Whitworth has been campaigning for a change in Lansing that would allow new community college employees to opt out of the state’s ailing public school employee retirement system. The roughly $35 billion retirement system that enrolls about 450,000 Michigan working and retired public school employees has lost $12.9 billion since early 2008.
“It’s a matter of being fiscally responsible,” Whitworth said. “This plan is based on the notion that people are incapable of managing their own resources.”
Whitworth wants new employees out of the old system and into a defined contribution plan similar to institutions like the University of Michigan.
The state constitution requires that community colleges offer a state retirement plan to all employees who are eligible, but a bill pending in the state Senate could change that.
And Whitworth isn’t waiting around for the Legislature — he’s also floating another idea.
He’d like the Board of Trustees to consider removing around 1,100 part-time employees from its payroll and rehiring them as contract employees, a move that would save around $1 million a year.
Pending board approval, about 400 part-time non-credit faculty and some low-level part-time employees would be removed from the WCC payroll. They would essentially be fired and re-hired as contract employees by a private temp firm hired by WCC.
“There’s no reason for the college to participate in a retirement program for someone teaching 15 hours a semester of banjo,” Whitworth said.
Those employees wouldn’t lose retirement benefits because they’d never become vested and collect them, Whitworth said. They don’t receive health benefits currently, either.
If that plan worked, about 700 part-time faculty teaching for-credit courses could go the same route.
The current system
WCC will contribute $9.8 million to the Michigan Public School Employees’ Retirement System this year, compared to about $3 million a decade ago. Beginning this fall, employees eligible for MPSERS will have to double their retirement contribution to 6 percent, while WCC will pay 19.4 percent into the system. The state will award WCC an $11.8 million appropriation for the college’s operational costs this year, almost a wash in the face of rising retirement costs, Whitworth said. A large part of that increasing contribution to MPSERS is attributable to the rising “unfunded liability”- a gap between what the state has actually saved and what it has to pay out to retirees. That number stood at about $12 billion in late 2009.
“They simply bill us for this unfunded liability,” Whitworth said.
The proposed changes
Whitworth testified in favor of Senate Bill 802 at a Senate Education Committee meeting in March. The bill would allow community colleges to enroll new employees into defined contribution accounts, the way the state’s 15 public universities already can.
It wouldn’t apply to existing employees already in the state retirement system, billed on its website as “one of the best public pensions around.”
Whitworth said he expects plenty of opposition as the bill moves forward. Early indications are that he’ll get it.
Brit Satchwell, president of the Ann Arbor Education Association, the teachers union for Ann Arbor Public Schools, said he opposes the bill. If community colleges pay less, the state’s K-12 districts would pay more, Satchwell and state teachers union officials said.
“I’m not in favor of them throwing those employees in front of the shifting winds of the stock market when it comes to their retirement,” Satchwell said. “They can’t have it both ways.”
At a March 4, 2010 hearing of the Senate Education Committee, eight organizations sent representatives to oppose the bill. Two groups showed up to support it.
But the bill, sponsored by State Sen. Wayne Kuipers, D-Holland, moved forward.
A partner bill is being drafted for the House of Representatives by State Representative John Walsh, R-Livonia. The measure needs approval from the full Legislature before becoming law.
Chuck Agerstrand, the retirement consultant for the Michigan Education Association, the statewide teachers union, said he will fight the legislation on behalf of his organization.
“Community colleges would like to get out of the pension system, and they would like the remaining plan participants to basically be burdened with their share of the costs,” Agerstrand said.
He acknowledged the retirement system doesn’t have the money to support participants and said the “treasurer can and should do a better job” at managing the fund.
Whitworth called the state’s defined benefit program “paternalistic.”
“Unfortunately, under the MPSERS system, the state is just as bad at investing this money as the employees are, maybe worse,” he said. “Consequently, they lost the money.”