New Topic Page: The Burden of Teachers' Pensions

You’ve heard it before: Our public school teachers, those who serve the public good by educating our nation’s next generation, are underpaid. Yet, a look at teacher pensions might very well paint a different picture. As our newest library topic, The Burden of Teachers' Pensions, shows, teachers’ benefits are in fact threatening the fiscal health of many states.

Reality check: The Manhattan Institute’s Josh Barro and Stuart Buck found that:

• “All fifty-nine pension funds studied face shortfalls.           
• California, the most populous state, has the largest unfunded teacher pension liability: almost $100 billion.
• The worst-funded plan in our sample is West Virginia’s, which we estimate to be only 31 percent funded.
• Five plans are 75 percent funded or better: teacher-dedicated plans in the District of Columbia, New York State and Washington State and state employee retirement systems in North Carolina and Tennessee that include teachers. …
• Total unfunded liabilities to teachers—i.e., the gap between existing plan assets and the present value of benefits accrued by plan participants—are $332 billion. …
• Only $116 billion, or less than one quarter, of this $600 billion discrepancy is attributable to the stock market drop precipitated by the 2007 financial crisis. …
• The Dow Jones Industrial Average would have to nearly double overnight to make up for the present underfunding of these plans.”

Now, you might say, if the state can’t pay, then it will default on its obligation. But it is not that simple, for two reasons. First, teachers are set up with so-called defined-benefits plans. These types of plans usually specify a certain amount of money the teacher will receive in retirement based on her years of service and income during her last few working years. Second, most states have enacted constitutional provisions to protect public pension benefits, which is to say, they have bound themselves to pay teachers’ pensions regardless of budgetary realities.

This last point bears repeating: In an effort to curry the favor of teachers unions, and their votes, legislators have obligated us, the taxpayers, to pay for the retirement of public school teachers, regardless of whether we can afford to do so. Public employees have essentially turned their pensions from a privilege into a right, thus staking a claim on our income.

In light of this, can we honestly still hold onto the myth that public school teachers are undercompensated?

To learn more about The Burden of Teachers' Pensions, go here.

If this topic interests you, you may want to check out these ones as well:

Teachers Unions 101
Teacher Pay, Rewards & Tenure
Public Pensions Crisis

For other great topics, visit our topic page library. Special thanks to intern Rachel Kotkin for creating this topic! For more information about becoming an intern with ITO, check here.