Updated September 17

Legislation to permanently eliminate the 3% tax some public school teachers pay into a health care fund for retirement passed through the Michigan Senate along party lines Tuesday.

, sponsored by state Sen. Kevin Hertel (D-St. Clair Shores), already won approval by the House in late June as the Legislature was working to for Fiscal Year 2025.

鈥淭his is a large investment in public education,鈥� Hertel told the Michigan Advance on Tuesday. 鈥淚 would say it鈥檚 transformational, and getting this done will allow us to then hopefully continue to build on those per-pupil increases year after year as we go forward.鈥�

That FY 2025 budget, which goes into effect Oct. 1, was the first in nearly a decade that failed to include an increase to the per-pupil allowance for the School Aid Budget, keeping it at $9,608 per student.

However, it did include a decrease in rates paid to the Michigan Public School Employees鈥� Retirement System (MPSERS), allowing the Democratic-led Legislature to redirect $670 million from the system into additional funding for schools, which Gov. Gretchen Whitmer鈥檚 administration originally proposed when she rolled out her $80.7 billion budget blueprint in February.

The bill passed 20-16, with all Democrats in favor and all Republicans who were present voting no. Sens. Rick Outman (R-Six Lakes) and Jim Runstead (R-White Lake) were excused.

Hertel said he was disappointed not to get any support from his Republican colleagues.

鈥淚鈥檓 somewhat shocked by that because we鈥檙e talking about freeing up $600 million across the state at our school districts,鈥� he said. 鈥淎nd for the teachers that are paying the 3% for the pension portion, you鈥檙e talking about putting those dollars back into their paychecks as well. So I was hopeful that we would have some support on the other side of the aisle. This is a game changer. It will fix a structural problem in how we fund our schools.鈥�

The bill was a substitute proposed by Sen. Darrin Camilleri (D-Trenton) which incorporates a sponsored by state Rep. Matt Koleszar (D-Plymouth). It automatically codifies a 5.75% rate reduction in payroll costs starting in FY 2026, which Camilleri said when combined with the FY 2025 budget, will make that savings permanent and 鈥減ut hundreds of millions of dollars back into the classroom immediately and for the long term.鈥�

That sentiment was echoed by Al Latosz, Superintendent of Algonac Community Schools and President of The K-12 Alliance of Michigan.

鈥淲e are grateful to the Michigan Senate for engaging in an ongoing dialogue with educators about the importance of responsibly and permanently reducing these decades-old debt payments that have been forced on our schools and students,鈥� said Latosz. 鈥淭he passage of SB 911 will free up hundreds of millions of dollars annually that schools across Michigan will be able to invest directly into the programs that support the needs of our students.鈥�

Republicans, as they have been from the outset of the plan, expressed concern about the legislation doing long-term damage by not fully funding future pension debt.

鈥淔ailing to pay your obligations has long-term implications,鈥� said Sen. Thomas Albert (R-Lowell). 鈥淚t makes it harder to fund education in the future, and it makes it harder for us to make sure we can pay our retirees the benefits they earned and are constitutionally protected.鈥�

Senate Minority Leader Aric Nesbitt (Porter Twp.) also expressed his opposition.

鈥淭he bill before us is everything that is wrong with government,鈥� he said. 鈥淎 cynical money grab whose victims won鈥檛 notice it until the thieves are long gone out of this building. Another empty win for the tax takers over the taxpayers. A raw deal dressed up to look like a good one. A shameless attempt to fool people, the same people who step up to teach our children. The bill is theft, pure and simple.鈥�

Hertel said he was perplexed by that characterization.

鈥淚 actually think you could call it theft if we continue to take 3% out of educators鈥� paychecks and take this money from school districts and put it into the health care side of the pension fund that is over 140% funded today,鈥� he said.. 鈥淚 don鈥檛 understand why we would continue to plug money into a fund that the experts tell us is properly funded when that money can do the work it needs to do in our classrooms and go back into the paycheck for educators across our state.鈥�

Sen. Dayna Polehanki (D-Livonia), chair of the Senate Education Committee and a former educator for 20 years, shared that point of view from the Senate floor in support of the bill.

鈥淪o in this year鈥檚 state budget, we reduced MPSERS鈥檚 payments instead, directing $600 million more state dollars right back into our schools. This is the average equivalent of approximately a $400 per student increase statewide. We also delivered a 3% pay increase for teachers who hired in before 2012 by removing the requirement of paying into this fully funded system,鈥� she said. 鈥淭his bill will grant school districts more flexibility in deciding how to use these surplus funds, including but not limited to investing in student mental health, in school safety, paying teachers more, staff more, and specialized academic interventions to meet unique school needs.鈥�

Hertel said the legislation will solidify the savings for school districts in perpetuity.

鈥淭hey can plan their budgets provided by these savings, and now they know it鈥檚 ongoing, so they can use those dollars to plan out year-over-year,鈥� he said.

The legislation now goes back to the House for a final vote, which Hertel expects will be next week. If it passes it will go to Whitmer for her signature.

is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Michigan Advance maintains editorial independence. Contact Editor Susan J. Demas for questions: info@michiganadvance.com. Follow Michigan Advance on and .

TOPEKA 鈥� Teachers in the state could move to a retirement plan with better long-term benefits if new legislation is advanced. The change may help stem the state鈥檚 increasingly severe teacher shortage.

Timothy Graham, director of government relations and legislative affairs for the Kansas National Education Association, pointed to state vacancies during a Tuesday hearing on the potential change. In fall 2023, the state had an estimated 1,810 teacher vacancies according to the Kansas State Department of Education. In fall 2022, there were 1,650 reported vacancies.

鈥淓ducators have accepted lower compensation to follow their passion,鈥� Graham said. 鈥淭hey鈥檝e consistently endured stagnating wages on top of that. They鈥檙e facing growing demands from the public and growing disciplinary situations in the classroom. 鈥� And now, like many other college graduates, teachers are starting their careers with tremendous student loan debt. Ensuring that they have a dignified and comfortable retirement after years of public service is simply the right thing to do.鈥�

Kansas implemented current tiers for the Kansas Public Employee Retirement System in 2015, following financial strain. KPERS includes all of the state鈥檚 public sector workers, such as teachers, lawmakers and firefighters.

These workers fall into three retirement levels: KPERS Tier 1 for people enrolled before July of 2009, KPERS 2 for those entering between July of 2009 to December of 2014, and KPERS Tier 3 for everyone enrolled after January of 2015.

Rather than relying on a formula based on years of service and final average salary, as in the traditional pension plan of Tiers 1 and 2, KPERS Tier 3 ties a member鈥檚 lifetime benefit to contributions and interest earned throughout the member鈥檚 career in a 401K-like account.

, heard Tuesday in the Senate Committee on Education, would convert Tier 3 members to Tier 2 by January 2025 and allow teachers who become KPERS members in July of 2024 to enter Tier 2. Shorter-term teachers who would receive more benefits under Tier 3 could choose to stay in Tier 3.

KPERS estimated 40,000 teachers are employed in Kansas school districts, about 15,500 of whom are KPERS Tier 3 members.

To showcase the difference in tiers, KPERS executive director Alan Conroy calculated the difference in benefits for a teacher who has been in the profession 30 years and retires at age 60 under the KPERS 2 and KPERS 3 tiers. A KPERS 2 teacher would receive $45,015, while a KPERS 3 teacher could receive between $26,978 to $36,866.

Leah Fliter, assistant executive director of advocacy with the Kansas Association of School Boards, spoke in favor of the change during a March 5 hearing.

Fliter said school board members within their organization felt the change could help attract and keep teachers in Kansas.

鈥淭hey felt an improved retirement benefit would not only attract young people to the profession but also encourage experienced teachers to remain in the classroom,鈥� Fliter said. 鈥淥ur members also stated that moving teachers to the improved benefit structure in Tier 2 would demonstrate respect for the profession.鈥�

is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on and .

Changes that started with passed in 2022 are now in effect for those with 529 education savings accounts. Now, besides putting aside funds for school expenses, account owners can jumpstart their retirement savings.

Starting Jan. 1, account owners are now able to roll over unused funds to Roth IRA accounts. It鈥檚 an important change for those who had concerns about oversaving for educational purposes, said Greg Dyer, chief compliance officer at , a state agency that manages and provides education on the savings plan.

鈥淐ongress鈥� intent was really to help kickstart the retirement savings for a beneficiary that has gotten through college,鈥� he said, 鈥渁nd doesn鈥檛 need them anymore for college expenses.鈥�

During the first 10 days of the change, there were more than 90 rollovers in Utah, Dyer said. The state has the fourth largest 529 plan in the country with over $21 billion in assets under its management, a fact Dyer attributed to the state鈥檚 low fees in investments and, overall, a good reputation.

529 plans, which got their name from section 529 of Internal Revenue Code, allow people from all over the country 鈥� except for Wyoming 鈥� to save for tuition and other school expenses, such as books, fees, room and board and other K-12 and graduate school expenses in their state鈥檚 plan.

Though there are different kinds of plans, one of the most popular works similarly to a Roth IRA, allowing people to have tax-advantaged savings plans for education purchases.

鈥淵ou don鈥檛 get a federal tax deduction going in, but the funds can compound and grow tax deferred,鈥� Dyer said. 鈥淎nd if you use them for qualified education expenses, then the taxes are waived.鈥�

But, there are some requirements to be able to transfer the funds: Accounts must be over 15 years old and account owners can鈥檛 roll over any funds or earnings that have accrued in the past five years.

鈥淭hose funds can grow but you can鈥檛 put a contribution in last year and then roll over this year,鈥� he said. 鈥淵ou have a five-year kind of wait period.鈥�

The annual amount that users can roll over is limited to the Roth IRA contribution cap, which is typically around $7,000 for all savings sources.

鈥淟et鈥檚 say that you put $5,000 into your regular Roth IRA,鈥� he said, 鈥測ou can only do $2,000 from your 529 plan.鈥�

Then, there鈥檚 also a lifetime limit of $35,000 for these rollover contributions.

is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Utah News Dispatch maintains editorial independence. Contact Editor McKenzie Romero for questions: info@utahnewsdispatch.com. Follow Utah News Dispatch on and .