Reforming MPSERS: The impact of issuing pension obligation bonds and extending debt payments

Governor Gretchen Whitmer and leaders of the GOP-led Michigan House and Senate have recently considered proposals to postpone making required principal and interest payments on the unfunded accrued actuarial liability (UAAL) of the Michigan Public School Employee Retirement System (MPSERS). For all variations of this idea, the immediate results of such actions would be the following:

  • increase the debt for which taxes must be imposed,
  • increase the total amount of taxpayer-funded payments necessary to repay this debt, and
  • reduce the payments made in the short-term.

Under these proposals, the reduction in payments during the next five years (which some policymakers refer to as “savings”) would be used for road funding.

The Macomb County superintendents commissioned Anderson Economic Group to analyze the risks and fiscal impact on taxpayers and school districts associated with two plans; the first involving a straightforward postponement of debt payments, and the second combining postponed debt payments with additional borrowing in the form of a pension obligation bond (POB).

Read the full report.