The Citizen’s Research Council (CRC) tracks trends in state government spending. They estimate that the MPSERS rate will rise annually for the foreseeable future. For 2006-07 the effective rate was 17.74% of payroll. For 2007-08 the rate is 16.72%. The decline in rate was due to a change in the “smoothing” methodology for calculating investment income – going from five-year smoothing to a single-year mark-to-market. They have returned to five-year smoothing going forward.
The proposed rate for 2008-09 is 16.54%.
Some perspective:
- In 1991 the rate was 10.79% of payroll
- In 2000 the rate was 11.66% of payroll
- In 2007 the rate was 17.71% of payroll
- In 2008 the rate is 16.72% of payroll
For 2009 the rate is proposedat 16.54%.
For the future CRC estimates:
- In 2010 the rate will be 18.12% of payroll
- In 2015 the rate will be 21.92% of payroll
- In 2020 the rate will be 27.91% of payroll
The bottom line is that we need to find a better way! What happens to the stock market affects our rates. The rate will rise, hopefully by less than CRC estimates.
To respond, calculate the cost of paying MPSERS on a per pupil basis, follow that figure and release these numbers to your staff and community as part of ongoing communications. Keeping people informed is vital to ongoing reform efforts.
Other considerations:
- Continual cost shifts through increased co-pays and deductibles
- Continue differentiation of two-tiered system
- Switching from the current Defined Benefit approach to Defined Contribution has a significant increased cost in the short term before savings in the long term.
Sustainability is a key issue for all MPSERS members. There is a delicate balance to maintain between providing good benefits and making sure that the system is affordable today and into the future.