What We Know About the 9.4 Million

We know that NMU along with six other public universities in Michigan have received multi-million dollar refunds from the Michigan Office of Retirement Services. According to published reports, MORS overbilled these universities on their pension payments for employees who were enrolled in the Michigan Public School Employees Retirement System.

Six of the Seven universities are (except Ferris State) are stuffing all of the money into reserve accounts or their investment portfolios.

University administrators at all seven institutions have known about the refund since July. For reasons not yet fully explained, the announcement was not made public until October 1.

Despite knowing about this windfall in July, the NMU administration cut the budget for Academic Affairs by 1.5 million, to help patch a 2.6 million dollar deficit. This has resulted in faculty being laid off, as contracts are not renewed. These layoffs were highlighted in a presentation given by the administration’s Finance Committee to the BOT back in September.

NMU administrators say we have a 40 million dollar pension liability extending to the year 2036, and all of the 9.4 million needs to be devoted to this. As the NMU-AAUP pointed out in several recent news articles, the funds are actually unrestricted, and NMU can do whatever it wants with this unexpected infusion of money.

Nevertheless, it is true that a 40 million dollar pension liability is on NMU’s books. New reporting requirements and changes in state laws mean NMU must report this liability on their Statement of Net Assets (Balance Sheet) and NMU also must report an annual pension “expense” on their Statement of Revenues and Expenses (Income Statement). It is important to note that “expenses” and “liabilities” are different animals even though they sound basically the same.

The view of Assistant Accounting Professor and NMU-AAUP data analyst George Wilson is that we can set aside a portion of the 9.4 million dollar refund to cover the annual pension “expense.” However, he advises that it would be nearly impossible for NMU to cover the “liability” with $9.4 million in current dollars.

According to Wilson, NMU currently pays about $5.2 million per year to MPSERS for retiree benefits, retiree health care, and to cover the unfunded liability.  He added, “We are currently halfway through the 40 year period where NMU will no longer need to contribute to MPSERS.  The cash outflow each year has been steadily increasing, but it ought to peak and begin to fall at some point in the medium-term future.”

Based on this information, the NMU-AAUP recommends that a portion of the 9.4 million dollar refund be used to limit adverse short-term effects on class sizes and staffing. According to NMU-AAUP President Becky Mead, many contingent instructors are fearful they will not be renewed. “The administration has been evasive about how these extensive cuts are. What is clear, however, is that painful decisions have already been made and people are being laid off due to the non-renewal of their term contracts,” Mead said.

Please comment on whether you support a hosting public meeting to discuss how to use the 9.4 million dollar windfall. Also please share what you know regarding staffing cuts or increases in enrollment caps for classes in your department.

Other related articles:

See how Ferris State is using its refund at: http://fsutorch.com/2015/09/30/ferris-receives-18-3-million-refund-from-michigan/

See how other universities plan to use the money

http://www.lansingstatejournal.com/story/news/local/michigan/2015/10/03/big-refunds-colleges-likely-lower-tuition-bills/73283238/

Article from Mining Journal, October 6th

http://www.miningjournal.net/page/content.detail/id/627313/NMU-faculty-union-wants–9M-applied-to-deficit.html?nav=5006

The Mysteries of the MPSERS Monies Explained