Perhaps the only thing related to K-12 education that Ohio's governor and lawmakers aren't talking about ???????fixing??????? is the State Teachers Retirement System (STRS). Odd, as few things are more outdated and in need of reform than the pension system.
We pointed out two years ago that the system is opaque, unsustainable, encourages early retirement, hinders mobility, and discourages many from entering the teaching profession. None of that has changed, and according to the system's latest annual report (which covers July 2007 through June 2008), things are only getting worse. As the economy has melted down STRS's unfunded liability has topped $18 billion (up $3.7 billion from the previous year and equal to roughly two-and-a-half times what the governor wants the state to spend on K-12 education next year). As this liability has increased, so has its amortization period, up from 26.1 years in 2007 to 41.2 years in 2008 (despite state law requiring an amortization period of no more than 30 years).
STRS attributes the dire situation to ???????investment returns being less than expected, retirees living longer and payroll growth being less than expected.??????? The pension system isn't likely to see its investments rebound in the near-term. In fact, next year's report (which will take into account the late-summer/early-fall stock market tumble) should be even worse. It's also not likely that retirees will start dying younger or that teachers will retire later of their own accord when the incentives favor them retiring in their mid-50s. The only way STRS can shore up its financial situation is to ask the Buckeye State's teachers and school districts to pony up more (Ohio teachers currently contribute 12 percent of their salaries to the system and districts put in another 14 percent).
With the infusion of money Governor Strickland is promising Ohio's schools (an additional $925 million over the next two years and billions more over the following six), the teacher pension system is sure to want a piece of the pie. When the inevitable proposals surface for increasing pension contributions and making other changes to the system, the governor and legislature should reject them and instead work together to build a retirement system that is fair, transparent, portable, and sustainable.
