NCTQ has been tracking the health of the nation’s teacher pension systems annually since 2008. It was a bad year to start—the Great Recession was heading for its nadir—but surely in 2014 things are starting to look up, right? Not so much, say the authors of the latest edition of Doing the Math on Teacher Pensions. In 2014, the overall debt load of teacher pension funds in the fifty states and the District of Columbia reached $499 billion (an increase of more than $100 billion in just the last two years). An average of seventy cents of every dollar contributed to the systems goes toward paying off the accumulated debt rather than paying into upcoming benefit needs. The folks at NCTQ, while not above some “sky-is-falling” rhetoric, report on the status of seven reforms that they believe would help to avert the pension disaster that has been looming for years, including full portability of plans, reasonable contribution rates for employers and teachers, and fair eligibility rules. The overall average state grade for teacher pension policy in 2014 is a lowly C-. Mountains of debt, overly long vesting periods, backloaded benefits, and lack of portability were the main sticking points this year. One state received an F (Mississippi); one an A (Alaska). The latter squarely hits five of the seven reforms, making a sustained effort to pay down its accrued pension debt after shutting down its previously mired defined benefit plan. The news in Ohio is mostly good. The Buckeye State received a B-, earning unreserved kudos for allowing early retirees to take at least part of their employers’ contribution with them, as well as more qualified praise for uniform accrual of benefits for all teachers and retirement eligibility based on age alone. The qualification comes as a result of Ohio offering a number of pension plan options—defined benefit, defined contribution, and a hybrid plan. The latter two receive the praise despite low utilization, while the defined benefit plan (which is responsible for Ohio’s currently unfunded pension liabilities of $31.7 billion) drags down our overall grade. NCTQ urges states to adopt pension reforms that will trim such liabilities, allow benefits to accrue smoothly and fairly across the system, and give teachers maximum benefits for service.
SOURCE: “Doing the Math on Teacher Pensions: How to Protect Teachers and Taxpayers,” National Council on Teacher Quality (January 2015)
