Last Friday, legislators rolled out an updated version of the Cupp-Patterson school fun
Last Friday, legislators rolled out anof the Cupp-Patterson , named after House Speaker Bob Cupp and Representative John Patterson. The plan was first introduced in and garnered significant media and lawmaker attention before the pandemic struck.
In brief, the plan would overhaul the funding formula that is used to distribute state dollars to Ohio school districts and public charter schools. Fully implemented, it would add—according to estimates released last week—a whopping $2 billion per year in state K–12 education outlays (a nearly 20 percent increase above thecurrently spent). The latest is up from an earlier version that called for $1.5 billion in additional state expenditures. Throw local and federal funding into the mix, and it would result in an increase of 8 percent on average.
The lead sponsors of the bill expressed hope that the plan would be enacted during the “lame duck” session between now and December 31. That’s certainly possible—there will be committee hearings, at least, over the next six weeks—but it’s more likely that the proposal will reemerge when the next General Assembly convenes in January and work begins on the state’s biennial budget. Proponents are urging swift enactment of the proposed framework, even if the plan cannot be fully funded, likely leaving the hard and more politically treacherous work of finding the money to future legislators.
In the coming days, I’ll be digging into the plan details in Substitute House Bill 305 and. In particular, the approach to funding school choice should be closely examined as the earlier iteration was not-so-friendly to . But even without knowing all the details, several big-picture questions still loom large.
- Is it responsible to enact a school funding plan that costs so much? The prior version of the Cupp-Patterson plan acknowledged the significant costs required to fully implement the new system and proposed a six-year phase-in, something that the updated version is also likely to include. This would have been a heavy lift even in normal times, but we now have a fragile economy and an uncertain state budget outlook, at least for the foreseeable future. Will the state be able to begin the phase-in of the funding increases in the next biennium? Would there be an appetite to raise taxes to fund schools, as businesses struggle to stay afloat and job growth remains tenuous? What happens if legislators adopt the plan, but can’t ultimately secure the money to meet its funding demands? Do they risk being accused of failing to fund their own formula?
- Will the plan win support from groups outside of the education establishment? , proposals to increase school spending seem to be most successful when they’re widely embraced by educators, employers, civic leaders, and communities. So far, the Cupp-Patterson plan has received backing from school districts and the teachers unions—no surprise given the funding increases. But the plan hasn’t gained much traction with a broader range of stakeholders. To my knowledge, no business group has endorsed the plan. Indeed, it’s hard to see how it would actually benefit employers; there’s no money set aside for, say, credentialing or work-based learning initiatives. There is talk, however, about small businesses paying higher taxes to fund it. The plan has also yet to gain support from groups that advocate for educational choice, given the lack of provisions that might encourage to open throughout the state, increase for middle-income families, or ensure that all districts are to children who reside outside of their boundaries. In terms of building a broad coalition that can support and sustain the new funding model, it still appears that the Cupp-Patterson plan has a ways to go.
- Could problems in school funding be solved in less expensive ways? To their credit, plan developers have identified problems that should be addressed by the legislature. But it’s worth asking whether they can be solved without spending billions in state money. The “cap,” for instance, is a well-known problem—one that the Kasich administration repeatedly urged the legislature to address years ago and that would be eliminated under the Cupp-Patterson proposal. But —a policy that shortchanges districts with growing enrollments—would cost the state roughly $450 million. This amount could be phased in and/or offset by repealing guarantees, state allocations that “overfund” certain districts. Meanwhile, if driving more state dollars to high-poverty districts and schools is a chief concern, the state could add a funding stream based on students who are . And in a move that would cost the state nothing, legislators could also demand that funds actually reach the schools in which low-income students attend (rather than be allocated to other schools within the same district). These improvements would cost the state less than what the Cupp-Patterson plan proposes. Why not take incremental steps to refine the system, especially at a time of such uncertainty?
The lead sponsors of the Cupp-Patterson plan should be commended for rolling up their sleeves and taking a close look at Ohio’s school funding model. Creating a well-functioning formula in “normal” times is a real challenge, and it’s doubly complicated in light of the current uncertainties. The proposal has important strengths, but its passage—and sustainability for decades to come—might just hinge on whether questions such as these can be satisfactorily answered.
In the waning days of October, the U.S. Department of Education (ED) released guidance that outlines the flexibilities states have under federal law to modify their accountability systems for the current school year (2020–21). Such modifications are necessary, given that annual assessments were cancelled in the spring, and states lack achievement and growth data from the 2019–20 school year. Any modifications must be made in the form of an amendment to the state’s ESSA plan, and requests must be submitted to ED by February 1, 2021.
There are two important caveats worth noting. First, the guidance is clear that states are expected to administer annual assessments during the 2020–21 school year. At least so far, Ohio plans to do so. However, given the state’s rapidly rising number of cases and the predictions of a dark winter ahead, the possibility of safely administering state assessments in-person this spring is still up in the air. If it turns out that schools can’t administer tests in-person, additional guidance will be needed. Second, the results of the recent election could affect ED’s posture towards accountability and testing guidance. We have no way of knowing for sure until after the inauguration in January, but a Biden administration could take a different approach.
In the meantime, though, Ohio and other states should heed this guidance. The bulk of it can be distilled into four key areas:
- Long term goals and measurements. In their ESSA plans, states are required to set long-term goals and interim progress targets for each subgroup of students in the areas of academic achievement, graduation rate, and English language proficiency. The federal Covid-19 guidance allows states to shift the timeline for measuring interim progress forward by one year, effectively skipping the missing year of data.
- Accountability indicators. Under ESSA, states are required to create and implement accountability systems that contain several indicators: achievement, a second academic measure for elementary and middle schools, graduation rates for high schools, progress for English language learners, and at least one additional measure of “school quality and student success.” The federal guidance allows states to revise these indicators for the 2020–21 school year, and a separate Frequently Asked Questions document outlines the details about what states can do. For example, states have three options for dealing with the lack of data: use a different methodology to calculate their indicators, substitute a new indicator that’s consistent with the law, or adjust their previously chosen weighting.
- Identification of schools. Federal law requires states to use accountability indicators to annually and meaningfully differentiate between all public schools. There are two main categories of schools that must be identified every three years: Comprehensive Support and Improvement Schools (which include the lowest performing 5 percent of Title I schools and all public high schools that fail to graduate 67 percent or more of their students), and Targeted Support and Intervention Schools (which include all schools where any subgroup of their students is labeled “consistently underperforming” by the state). In terms of guidance, states have two options: continue to follow the identification timeline approved in their original state plan, or shift the identification timeline forward one year.
- Exit criteria for school identification. ESSA requires states to establish statewide exit criteria for schools that are identified for comprehensive or targeted support. The recently released federal guidance temporarily eliminates these exit opportunities. Schools that were identified for the 2019–20 school year must remain on the list during the coming year with one exception: Schools that were identified as comprehensive based on their graduation rate will be permitted to shed their identification status if they meet their unique exit criteria. This is because graduation rates were not impacted by the cancellation of annual assessments. There’s no missing data, so there’s no need to adjust policies.
What does all this mean for Ohio? There won’t be much of an impact on the state’s long-term goals and measurements. It’s likely that Ohio will take advantage of the provided flexibility and shift timelines forward a year, and it’s unlikely there will be much pushback because there isn’t really an alternative. No data means no way to measure progress. The same is true for school identification and exit criteria. It’s reasonable to assume that the state will take advantage of federal flexibility because of missing data, and it’s likely there won’t be much pushback because federal school identification typically flies under the radar.
That leaves the flexibility around accountability indicators. Of the options provided, changing the methodology makes the most sense. For instance, the state could adjust its methodology for calculating the Progress indicator by using student test scores from earlier years to make up for the missing data from 2019–20. While this isn’t ideal—and could spark some controversy—it’s been done before and it’s the best available option.
Of course, Progress isn’t the only indicator that will need to be adjusted. Gap Closing, which includes the federally-required measure of progress for English language learners and also relies on prior-year data, would need to undergo a methodology change, as well. The Graduation and Prepared for Success components can remain untouched, since calculating these indicators won’t be impacted by a lack of test data. But Ohio will need to figure out how to address chronic absenteeism, which it uses to meet the federal law’s requirement of an indicator that measures school quality and student success. Obviously, a lack of testing data doesn’t impact attendance counts. But hybrid or virtual schooling does, and it’s no secret that schools have been struggling with how to track attendance during remote learning. Fortunately, the federal guidance indicates that states are permitted to adjust their attendance calculations to account for Covid-19 attendance issues.
Regardless of how Ohio responds to this guidance, one thing is for sure: Preparation is key. Until we know for sure what this spring will bring, state leaders should focus on what they can control. That means amending the state’s ESSA plan to align with the federal guidance they have right now. Doing so would surely help bring some certainty to an uncertain future.
The fiscal woes of state pension systems are regularly in the news. Earlier this year, in the midst of economic turmoil, the New York Times and other outlets covered Illinois’ for a federal bailout of its historically underfunded pensions. Closer to home, local media have covered on addressing the unfunded liabilities—the difference between promised retirement benefits and the monies set aside to pay them—of Ohio’s pension systems.
Given the attention paid to pensions, it may surprise you to learn that Ohio doesn’t actually require public school teachers to enroll in the state pension plan. Starting in 2001, the state has offered teachers a choice in retirement plans. They may enroll in a 401(k)-style defined-contribution (DC) plan, a traditional pension, or a hybrid that combines features of both. However, by , new teachers are automatically enrolled in the pension plan if they make no affirmative decision within 180 days of starting their jobs. In practice, the vast majority of Ohio teachers take no action and thus land—permanently—in the pension system.
This default policy would make logical sense if the pension plan delivered more generous benefits than the other retirement options. But does it?
Authored by Chad Aldeman, a seasoned pensions analyst at , a shows that today’s automatic default, innocuous as it may seem, costs Ohio teachers tens of thousands in retirement benefits. His analysis shows that new educators—even those who expect to teach into their fifties and sixties—would be better off financially in either the DC or hybrid plan.
The numbers are staggering. Consider a brand-new teacher right out of college. Under the standard state pension, she would accrue retirement benefits worth about $100,000 if she decided to leave the Ohio school system at age forty. Should she stay until sixty, her pension would be worth approximately $800,000. Not too shabby, right? Yet the DC option performs even better: At age forty, Aldeman calculates retirement benefits worth about $300,000—roughly three times the pension. And at age sixty, she’ll have saved around $1.2 million for retirement (as might be expected, the hybrid yields benefits that fall between the DC and pension plans). These results assume investment returns of 7.45 and 6.45 percent, respectively, for the pension and DC plans—rates that, while unlikely to be met in the near term due to the economic downturn, are in line with historical returns on equities.
For those who choose—or are defaulted into—the pension plan, this is real money left on the table. The differences in benefits could mean staying in the comforts of the family home well into retirement, rather than needing to downsize. The extra savings could pay for the trip of a lifetime after years of serving students. Or maybe the money represents the chance to help finance a grandchild’s college education. Of course, some teachers may believe the peace of mind commonly associated with a pension is worth these costs. But the opportunity for a more fulfilling retirement may slide by just because a youthful, first-year teacher does not fully comprehend the implications of her choice in retirement plans.
Why the discrepancies? The required contribution rates are the same across the three retirement options: 28 percent of a teacher’s salary, combining the employer and employee contribution. The difference, however, turns on how these contributions benefit teachers. Under the DC plan, the bulk of a teacher’s contributions, 23.5 percent, goes directly toward her own savings; under the hybrid plan, the figure is 16 percent. Yet when she selects or defaults into the pension plan, state actuaries calculate that just 10.8 percent of the required contribution supports her own retirement. Instead, most of it helps the pension system pay down tens of billions in existing unfunded liabilities ($23.4 billion as of 2019) to current teachers and retirees.
Based on this analysis, we conclude that state policymakers should switch the default from the pension to either the DC or hybrid plan. Viewed strictly in terms of financial benefits, the 401(k)-style DC plan would be the superior default, as it outperforms the hybrid. Yet the hybrid plan, because it contains a pension component, does promise a basic level of lifetime income, something that a DC plan can’t guarantee (and Ohio teachers don’t participate in social security). The hybrid also currently offers retiree healthcare benefits for which DC participants are ineligible. Overall, state policymakers should thoughtfully weigh the tradeoffs of these two options—a solid discussion appears in Aldeman’s paper—and consider altering the default policy.
Our recent challenges the conventional wisdom that traditional pensions remain the best option for retirees. That may have been true for previous generations, especially those who taught before the rise of individual retirement accounts. But Ohio’s unfunded pension liabilities mean that teachers hired today are at risk of receiving skimpier benefits when they retire. This, in fact, has already happened once within the past decade: the state, acknowledging the need to address unfunded liabilities, that reduced benefits for future retirees.
With the traditional teacher pension plan under financial pressure and projected to deliver lesser benefits than other options, it’s time for policymakers to reconsider whether it remains the best way to support the next generation of Ohio educators. Whether it’s a career in the classroom or just a few years of service, teachers deserve the retirement benefits they’ve worked so hard to earn.
In policy circles, school choice and desegregation discussions often stop at the schoolhouse door. But a timelyedited by a high school senior from Columbus goes inside the gates, and should be essential reading for anyone working in education at any level.
Black Girl, White School is a strong reminder that the students who attend charters or private schools aren’t just statistics or dollar amounts, but real people who are willing to leave familiar terrain in pursuit of a better education. Given theof school district boundaries, such decisions often mean that students of color attend predominantly White institutions (PWI). Such is the case for the book’s editor Olivia V.G. Clarke, as well as the volume’s other contributors, who range from fellow high schoolers to college students to young adults who are now part of the working world.
Clarke herself seems to haveat Columbus School for Girls (CSG), a highly-regarded, secular, independent, K–12 private school. She will graduate a year early thanks to the availability of academic acceleration. But as the book’s subtitle suggests, academics often take a backseat to racial dynamics. , CSG’s student body is 31 percent non-White, but Clarke often felt that she was the “token” Black student, and therefore required to represent all Black people to White students and teachers. In one of many letters to her younger self, Clarke writes: “Suddenly and often unfairly you become a representative for all people of your ethnic background.” Various other contributors express similar experiences. “In the transition from public middle school to the private, predominately white school you currently attend, you lost everything you once knew…,” high school junior Aminah Aliu writes. “In the classrooms where you were the only Black girl—the only Black person—you felt betrayed by the school that let you in but didn’t know how to keep you from falling apart.” From slavery to desegregation to Black Lives Matter, these young people—trying to learn history and civics too, don’t forget—found themselves being used as the filters through which White adults and peers explored difficult and complex topics.
Unfortunately, being asked to “” of representing Blackness for the benefit of White adults and peers was one of the more benign struggles described. Obsessions with students’ hair, skin, and names abound in the book’s essays, poems, and reflections. The authors recount rude questions, intrusive requests, and numerous slights from White kids and g alike. And worse. “I don’t see why you’re worried about getting into college,” begins an unwanted comment recalled by Lydia Patterson in her freshman year at “the bougiest private school” in Houston. “You have affirmative action… You know that’s the only reason you’re here, right?”
An interesting facet of these memoirs is a tonal difference based on age. Pieces from the youngest contributors are often characterized with questions—they wonder if they brought such attention onto themselves by their actions or words, and they long to figure out how to simply exist and learn without so many people watching their every move. “Some will ask why your hair is not straight like theirs,” warns Marissa Glonek to other Black girls following in her footsteps. “Some will stare at you in history class to gauge your reaction to slavery.” The oldest contributors’ pieces are set off from the others by text and design—titled “Thrive Tips”—forming a sort of chorus of affirmation in response to the younger students’ questions. The gist of their reflections is “we survived this, and so can you.” In fact, Clarke herself seems well on the way to turning that corner. Knowing that in the past, she didn’t always feel comfortable to fully be herself, she writes to her younger self: “Take pride in what you have. Take pride in your gorgeous hair and your beautiful melanin. You are enough. You’re beautiful.”
There are plenty of important takeaways from this book. But the biggest is that it shouldn’t be this hard for students of color who seek a new and better learning environment. It is completely awesome that Olivia V.G. Clarke and her peers have taken the initiative to band together and support each other to and through PWI’s. But it would be far more awesome if the staff and students in these schools offered unconditional welcomes and fewer questions and thoughtless comments. There are more and more students of color coming behind Clarke. Policymakers and school leaders must remember that real students are uprooting themselves in search of a better fit. They need more thriving, less just surviving, and no more requests to touch their hair.
SOURCE: Olivia V.G. Clarke, ed.,, Lifeslice Media (Columbus, Ohio), 2020.
It’s been over two years since the Strengthening Career and Technical Education for the 21st Century Act was signed into federal law with overwhelming bipartisan support. The law is a reauthorization of the Carl D. Perkins Career and Technical Education Act of 2006, and is often referred to as. Its primary purpose is to govern how states implement and expand access to career and technical education (CTE) programs, while providing over a billion dollars in funding to states, districts, and community colleges.
Perkins V provides states with much of the same implementation flexibility that previous iterations of the law offered. But there are several significant changes. These include an increased emphasis on equity, streamlined accountability provisions, and the requirement that eligible funding recipients conduct a Comprehensive Local Needs Assessment (CLNA). In a recently published report,examines states’ Perkins V plans to determine how they responded to these changes. The report restricts its focus to plans—not implementation efforts, which are just getting underway—and makes no attempt to determine whether states met the law’s expectations. Instead, the analysis focuses on how states took advantage of the law’s flexibility to address equity and quality.
Although Perkins V leaves plenty of room for flexibility and interpretation, Advance CTE identified a few common aspects of states’ plans that signal a “comprehensive and cohesive” statewide CTE strategy. These include vision, collaboration, a focus on equity, determining program quality, attracting and developing CTE instructors, and data-driven decision-making. Let’s take a look at each.
A state’s vision for CTE largely determines how leaders choose to distribute its Perkins V funds. For example, the Reserve Fund is an optional pot of money aimed at supporting CTE program quality and innovation. The vast majority of states—90 percent—decided to set aside funds through this option and fourteen states elected to use the maximum amount allowable under law. Among the forty-six states that chose to use the funds, 53 percent pledge to use it to support, which consist of a sequence of courses and skills that are considered representative of quality programs and can help students transition from secondary to postsecondary programs. Thirty-seven percent of states plan to use the funds to close equity gaps. Another 31 percent will direct the funds to rural CTE.
Given that CTE spans secondary and postsecondary education as well as the workforce, collaboration across sectors is critical. Alignment was a driving factor in reauthorization efforts, and the law provides states with a menu of options for how to align their systems. For example, states are permitted to submit a single plan that fulfills the requirements of Perkins, the, and several other associated federal programs. Nine states chose to take advantage of this opportunity—Alabama, Delaware, Indiana, Minnesota, Ohio, Pennsylvania, Rhode Island, Virginia, and Washington. In a win for data transparency, a whopping forty-six states plan to promote alignment by sharing labor market information across sectors. Thirty-two states plan to use a statewide advisory committee with a “diverse membership” to provide input on state, regional, and local efforts. Seventy-eight percent of states report developing feedback loops to gather consistent input from secondary and postsecondary CTE practitioners.
An increased focus on equity is one of the “seismic shifts” of Perkins V according to Advance CTE, and this increased focus is clear in the majority of state plans. For the purposes of this report, Advance CTE defines an equity gap as “an observable disparity in access and/or outcomes for specific subgroups” that are “the result of systemic inequities, implicit biases, and/or outright discrimination.” Eighty-two percent of states will use targeted technical assistance to help close these gaps. Thirty-three states have pledged to use their CLNA or local application processes to prioritize closing gaps. More than half of states plan to provide dashboards or other data tools to help local leaders analyze gaps. And several states plan to direct funding toward equity initiatives. Rhode Island, for example, plans to use a portion of the state’s Reserve Fund to provide equity grants to secondary CTE programs that will be used to address the access, participation, or performance gaps of specific populations.
Another key focus of the reauthorized law is a commitment to measuring program quality and streamlining accountability.framework is considered instrumental to quality, so it’s unsurprising that sixteen states have developed programs based on the framework and mandate their use. Thirty-two states allow local grant recipients to develop their own, though they must be approved by the state. The law also introduces three new secondary CTE accountability measures, referred to as program quality indicators. They are work-based learning (WBL), recognized postsecondary credentials, and postsecondary credit attainment through dual enrollment or articulation. When it comes to states’ program approval processes, 55 percent of states use dual enrollment and articulation as a factor in their decision, 47 percent use WBL, and 41 percent use credentials. (It is possible to use more than one.) To ensure that credentials are high quality and valued by employers, 27 percent of states reported that they plan to create or already have state-developed lists of approved credentials.
While equity and quality are key to successful CTE programs, states’ ability to attract, develop, and retain high quality CTE teachers is integral to those efforts.also indicates that a diverse teacher workforce can have a positive impact on learner outcomes. Unfortunately, attracting and retaining qualified and diverse teachers remains one of the sector’s most stubborn challenges. Eighty-six percent of state CTE directors reported either a moderate or severe teacher shortage in at least one career cluster at the secondary level, and 60 percent reported similar shortages at the postsecondary level. It’s puzzling, then, that only 27 percent of states report developing explicit recruitment plans or activities, and only five states—Florida, Minnesota, New Hampshire, Oregon, and Washington—identified explicit recruitment activities focused on diversifying the CTE teaching corps. It seems that the majority of states are focusing on development rather than recruitment. Nearly three quarters of states reported that they are offering targeted professional development for specific groups of educators, administrators, or other CTE professionals.
The final piece of a solid state plan is data-driven decision-making. Such efforts must be supported by quality data, public reporting, and meaningful accountability indicators. As mentioned previously, the law gives states three program quality indicator options that must apply to all secondary CTE concentrators: WBL, recognized postsecondary credentials, and postsecondary credit attainment. Nineteen states chose to incorporate more than one indicator. Four states—Delaware, Indiana, Washington, and West Virginia—elected to use all three options. More than one third of states also indicated that they are developing public reporting tools for their CTE programs. One example is West Virginia, which is in the midst of creating CTE data profiles for each county and school district.
Overall, states took plenty of unique approaches to planning for Perkins V. That’s not surprising, considering that they were given a tremendous amount of flexibility. But there are some common themes threaded throughout the majority of plans. By and large, states seem to have recognized the importance of focusing on equity and meeting the needs of individual learners. Many are using their plans to address longstanding challenges facing the CTE community, and they are prioritizing support for teachers. States have also put a significant amount of work into the development of their first ever CLNAs, and are working to ensure data quality and transparent reporting. Right now, things look promising. But in the coming years, as these plans are implemented and tweaked, it will be critical for stakeholders and advocates to actively monitor progress and hold states accountable.
Source: “,” Advance CTE (October 2020).
This week, Fordham released its latest report, an analysis of the three retirement options available for Ohio teachers. The research, conducted by national pensions expert Chad Aldeman of Bellwether Education Partners, calculates the financial benefits offered by each plan.
In conjunction with the report release, Aldeman presented his findings at a virtual event. He began with some important background. In Ohio, the State Teachers Retirement System (STRS) manages the retirement benefits of nearly half a million active, inactive, and retired public school educators. Approximately twenty years ago, Ohio leaders chose to provide teachers with a choice between three retirement plans. The Buckeye State is one of only five states that offer such a choice. The options are:
- The defined-benefit plan. This is a traditional pension plan that uses a formula based on salary and years of experience to provide teachers with a defined benefit until death. Benefits include both income and healthcare for retirees and their families, but educators must teach until the state-defined retirement age to receive full benefits. Reduced benefits are available for early retirees that meet certain criteria.
- The defined-contribution plan. Like a 401(k), this plan defines the employee benefit in terms of how much the employer contributes into the employee’s account. Teachers fully own the funds in their accounts and are able to make investment decisions. They also have more flexibility around when they choose to retire, though they are subject to federal laws restricting when they can start collecting funds.
- The combined plan. As its name suggests, this plan combines aspects of both the defined-benefit and defined-contribution options. Like those who choose the defined-benefit plan, teachers who select the combined plan have access to healthcare benefits.
Once hired, new teachers are given an election form to make their choice. If they choose not to fill out the form, the system automatically enrolls them into the default option, which per state law is the defined-benefit plan. Approximately 78 percent of teachers don’t make a decision, and thereby default into the traditional pension option.
It’s unclear why such a large number of teachers choose not to make an affirmative choice. However, Aldeman pointed out that research generally indicates that employees view defaults as recommendations. It’s possible that teachers opt for (or default into) the defined-benefit plan because they assume it’s the best one. Regardless of why teachers choose—or don’t choose—their plans, though, there’s no denying that the stakes are high. Ohio does not permit public employees to change retirement plans once they select one or to draw social security benefits. That means Ohio teachers are dependent on the STRS plan they choose for their retirement.
With these stakes in mind, Aldeman sought to determine which plan yields the highest benefit for retirees. In all three plans, employees have the same contribution rate of 14 percent. In the defined-benefit plan, though, a portion of that contribution goes toward paying for the system’s unfunded liabilities instead of going toward their own benefits. As a result, a teacher’s contribution to her own retirement benefits in the defined-benefit plan is only 10.83 percent. That’s less than what the combined plan offers (15.99 percent), and significantly less than the defined-contribution plan (23.52 percent). These differences are particularly stark when one considers that teachers who choose the defined-contribution plan have access to their money immediately and are able to take it with them should they choose a different career. Overall, both the combined and defined-contribution plans outperform the defined-benefit plan for most workers.
But that’s not all that’s worrisome about the state’s default plan. In the last few years, defined-benefit plans have undergone significant changes as Ohio has gradually phased in benefit cuts for new retirees. For example, STRS removed a higher benefit multiplier that was previously available for teachers with thirty or more years of experience. In addition, the final average salary figure was reduced and the retirement age was increased. This means teachers must now work longer, but they get fewer benefits in return. The cost of living adjustment was also decreased from two percent down to zero, so STRS benefits no longer adjust with inflation. All things considered, the defined-benefit plan is becoming an increasingly poor option.
If the state wants to do right by its teachers, the best path forward is to change the default plan from the defined-benefit option to either the defined-contribution or combined option. This would “nudge” teachers toward the plans that offer them the best benefits in the long run. Aldeman was clear that changing the default plan would not affect current retirees or workers. It wouldn’t take away teachers’ choice, either—new teachers are still free to select whichever plan they desire. But given that default options hold so much sway, especially for young teachers, the state has a responsibility to make sure the default plan is the best one.
The presentation was followed by a question and answer session for event attendees. One attendee asked whether there is evidence that pension plans can help with teacher retention. Aldeman explained that the research suggests that pensions are not an especially strong recruitment incentive. “People don’t make decisions based on the pension itself,” he said. “Teachers don’t react to that benefit. They’re making decisions based on salary, geography and other life aspects.”
Another attendee wondered if the state was educating new teachers on their options. “STRS does have an office dedicated to this,” Aldeman replied. “Any member can call them up and ask for some guidance. There’s guidance documents on the STRS website. To STRS credit, they’ve done a good job of that.” But he also noted that there’s always room for improvement. “I do think this nudging is a very powerful element,” he said. “In Ohio, the defined-benefit plan is not a great benefit, and the workers are not getting a good deal out of it.”
Given the hard work that Ohio teachers do every day on behalf of students, it’s important that the state’s retirement system does right by them. Teachers deserve a choice, and their three options should remain intact. But it’s also important for the state to ensure that the default option is the best one. That means moving away from the defined-benefit option.