Retirement plans, much like recurring dreams and fantasy football rosters, are a captivating topic to those directly involved, but pretty much deadening to the rest of us. That’s unfortunate, because the state of our public pensions is a mess that we’re eventually going to have to reckon with. According to the Pew Charitable Trusts, the total budgetary shortfall facing this country’s public-sector retirement systems exceeded $900 billion in FY2012, and teacher-related costs may be the largest single contributor to that figure. The authors of this stark NCTQ report estimate that teacher pensions now account for a half-trillion dollars in unfunded liabilities. A price tag that colossal can be tough to contextualize, but don’t miss the trees for the forest here—this debt is no mere abstraction to the hundreds of districts feeling its squeeze. Metropolises like Chicago and Philadelphia have undergone cataclysmic waves of layoffs, while some smaller districts have been so awash in red ink that they’ve simply been dismantled, leaving both jobless employees and dislocated students in crisis. With the stakes that high, it’s crucial that state officials begin to take steps toward retrenchment, and NCTQ has been issuing calls for responsibility for years. Doing the Math follows close on the heels of prior research, and its remedies are unchanged from earlier iterations: Switch over from defined benefits packages to 401(k)s, allow employees a greater measure of fairness and flexibility in exchange for diminished security, and face up to a realistic appraisal of investment returns. No, it won’t be easy persuading teachers to forego the seemingly unbeatable guarantee of defined benefits, but look a bit closer and you’ll discover that those parachutes are often made of fool’s gold. Less than one-fifth of teachers actually stay in the job long enough to gain eligibility for full benefits; those who leave early are denied access to employer contributions and, in some states, can’t even collect the entire amount they’ve paid in. The system is rigged against its employees, who chase after absurdly long vesting periods in pursuit of a backloaded reward. Rectifying these practices will be a heavy lift—the report identifies a whopping total of seven states (out of fifty, plus the District of Columbia) that offer their teachers a fully portable plan, to go along with just nine whose pension systems are adequately funded—but it’s the only way to give this less-than-riveting story a happy ending.
SOURCE: Kathryn M. Doherty, Sandi Jacobs, and Martin F. Lueken, “Doing the Math on Teacher Pensions: How to Protect Teachers and Taxpayers,” National Council on Teacher Quality (January 2015).
