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Pension Costs

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Education Next, 5/8/19

How to fix teacher pensions

Much of the debate over teacher pensions is framed as an either/or: Either we keep current defined benefit plans or we shift teachers to low-cost 401k-style defined contribution plans like in the private sector. A recent paper by Bellwether Education Partners shows that this is a false dichotomy. There are cost-neutral alternatives, such as cash balance plans or well-designed defined contribution plans, that could do a better job of providing all teachers with retirement security than the typical defined benefit plan does today. Yet adopting a wholly different model is not the only option for state policymakers who want to provide more teachers with adequate savings—and that’s probably a good thing, since defined benefit plans are likely to be with us for a while. Bellwether estimates that under current plans about 80 percent of new, young teachers will leave before qualifying for retirement benefits that meet our definition of “adequate” retirement benefits. This post explores ways to improve that figure using existing defined benefit pension plan structures.

Education Week, 3/17/19

Most teachers won’t have enough retirement savings under pension plans, study finds

Teachers who plan to stay in the classroom and work in the same state for their entire career will have a steady stream of income for the rest of their life. But those who leave the profession sometime before the 30-year mark, or even change states, won’t have enough saved to retire comfortably. That’s according to a new study from the Bellwether Education Partners, an education nonprofit group. The study estimates that 81 percent of teachers who start working at age 25 will fail to qualify for adequate retirement benefits under a typical defined-benefit pension plan. Chad Aldeman, a principal at Bellwether Education Partners and an author of this study, said even after teachers are vested, “it can take 25 years before the pension is worth more than the teacher’s contribution.”

Education Dive, 3/5/19

Denver cuts 150 central office positions to make room for teacher, staff raises

After announcing last month that it would cut more than 150 administrative positions from its administrative staff, Denver Public Schools (DPS) has begun the process. The cuts will direct $17 million toward raising pay for district employees and teachers — who went on strike in February to demand higher salaries — and additional funds will go to special education services. Many blame inflated district administrations for suppressing teachers’ pay. Some critics say there aren’t too many administrators, and that these figures don’t make up a significant percentage of employees in public school districts. Additionally, others argue there are reasons for any growth in number of administrators. For one thing, if it wasn’t for these staff members, the tasks they complete would fall on the shoulders of faculty members.

The 74 Million, 2/11/19

The L.A. teacher strike may be over, but observers warn there’s no ‘clear path forward’ for how the school district can afford its new contract

The L.A. Unified school board has approved a contract with its teachers union that officials admit they can’t fully afford, calling the deal’s sustainability into question as the district receives repeated warnings from the county that it’s in severe financial straits. To shoulder about $840 million in added costs through 2021, district officials say they’re largely relying on more state funding and a 2020 California tax referendum — neither of which are guaranteed. District board members could also float a parcel tax, though it’s been unpopular in the past. Short-term fixes so far include cuts to the central office and the reassignment of some funds within the budget, a spokeswoman said via email.

Education Week, 1/23/19

Why your superintendent doesn’t want to give teachers a raise

Governors in recent years have been pouring money into school districts budgets, yet teachers’ pay has, for the most part, not budged. Driven in part by salary issues, teachers in Los Angeles went on strike, and teachers in Denver decided Wednesday to go on strike. So what’s up?  Education Week outlines a few things district superintendents, CFOs, and school board members have said they think about when considering whether or not they should give their teachers a raise, including the dangers of using one-time money, back filling positions that were cut during the recession, reducing class sizes, and pensions.  

Education Next, 1/24/19

Los Angeles teachers strike a deal, but miss an opportunity

The LAUSD-UTLA deal ignores the growing bite that retirement costs and underfunded pensions are taking out of the dollars earmarked for students and practicing teachers. Stanford’s Crane observes, “One-third of LAUSD’s retirement spending is for unnecessary, duplicative or excessive health insurance subsidies provided to retirees entitled to Medicare or ACA coverage. Terminating those subsidies could provide an immediate $10,000 salary increase for LAUSD teachers.” Yet, despite the ugly math, there are no indications that the LA deal does anything but kick the can on these profound challenges.

Education Week, 1/18/19

California isn’t alone. School funding will be a headache for many states this year.

It looks like how and whether to spend more on K-12 schools this year will dominate this year’s legislative sessions. Many of the governors elected last fall are looking to deliver on promises they made on the campaign trail to provide more funding to schools and boost teacher salaries. More than 29 states still have not restored school funding to pre-recession levels and many districts continue to make dramatic cuts because of other obligations such as pensions and health-care costs.  But expanding pre-K, boosting teacher pay, and assuring that new money is spent on the classroom is a complicated and politically arduous task. Education Week outlines a list of states where fights over school funding will be especially politically contentious.

Education Dive, 1/10/19

Study: Pension plans generally better for teachers than 401K-style accounts

New research from the University of California, Berkeley Center for Labor Research and Education and the National Institute on Retirement Security, comparing teacher pension plans and 401K-style accounts in six states, concludes that pensions generally provide greater value to teachers and play a critical role in retaining educators. However, since the market crash in 2008, 48 states have made changes to their pension plans as have many companies across the nation. Many states are now facing unfunded liabilities that range from mildly concerning to nearly catastrophic. These unfunded liabilities are threatening the security of some pension plans and causing states to divert money from other services, including education, to keep pace with funding the plans.

Education Week, 9/17/18

How to build a better teacher contract

A district of over 13,000 students in Illinois ratified and approved a collectively bargained teacher contract months ahead of schedule. The contract fell within district budget projections, eliminated the traditional salary schedule, and rewarded teacher performance. In a post-Janus era, this type of collaboration could be increasingly valuable. Those involved noted that there were many factors that contributed to their success, but outlined seven essential steps that can now serve as guideposts for other districts interested in thinking about compensation differently.

Education Week, 9/5/18

Teachers are paid almost 20 percent less than similar professionals, analysis finds

The wage gap between teachers and comparable professionals has grown over time, with teachers now earning 18.7 percent less than other college-educated workers, according to a new analysis. A new paper published by the Economic Policy Institute, a nonpartisan think tank supported by labor unions, found that the “teacher wage penalty” has increased significantly—teachers earned just 1.8 percent less than comparable workers in 1994. And although teachers do receive better benefits packages than their college-educated peers, those benefits only mitigate part of the gap: Including benefits, teachers face an 11 percent compensation penalty.