Teacher pensions and the $800 billion in debt states have accumulated around these retirement costs have become a major roadblock for administrators trying to raise salaries in the classroom. The issue is “creating a massive disconnect between teachers’ total compensation and their actual paychecks,” writes Chad Aldeman, the founder of TeacherPensions.org, in an analysis for the Bellwether Foundation, a think tank focused on educational equity.
Essentially, districts are spending more on teachers, who are receiving less of their salary as income. “State leaders should stop passing the buck on to school districts,” Aldeman asserts in the just-released report. “Right now, state leaders can say they’re increasing education budgets while they turn around and raise the pension contribution rates that all school districts are required to pay.”
“This two-step allows states to shirk their pension responsibilities, and it’s not fair to school districts,” he adds.
This means that substantial increases in per-pupil spending are being swallowed up by teacher pension debts that are piling up from annual shortfalls in retirement payments. Rising retirement costs have outpaced salary increases, 322% to 44%, since 2004, and workers are not even benefiting “thanks to negligence in how [states] fund their teacher pension plans,” Aldeman finds.
“This problem matters for school leaders and state policymakers because it means they’re buying less teacher labor for every dollar they invest—and that efforts to raise teacher salaries will fail or be far less successful than state and federal leaders are proposing,” he says. “These pension debt costs are crowding out other potential investments in education.”
Turning the tide on teacher pensions
Some states—Wyoming, South Dakota, Delaware, Nebraska, and Florida—have handled soaring teacher pension costs more effectively, says Aldeman, citing data from the Equable Institute, which tracks health retirement plans.
More from DA: This superintendent wants everyone to know his district’s 4 big philosophies
District leaders can push policymakers to follow these states in setting more reasonable targets for investment returns. States tend to make aggressive pension assumptions so that on paper they don’t need to contribute as much along the way,” he argues. “Lowering the assumed rate of return would cause some short-term pain as budget makers faced up to the true costs, but over time it would help plans get back on sound financial footing.”
State leaders, along with administrators, can also ask teachers’ unions how their members want compensation split between salaries and benefits. States can also give teachers access to a wider array of retirement plans. “In a vacuum, employees will say they want higher salaries and better benefits—until they understand the financial trade-offs and options available to them,” he says. “Many states offer retirement benefits for higher education employees that are both more generous and more flexible than what’s offered to K-12 workers.”
Finally, K12 administrators should also encourage state leaders to treat pension debts as long-term state obligations, which would force those officials to “come up with a responsible plan to address it over time.” “That would leave school district leaders to focus on raising teacher salaries and getting more money into their paychecks,” Aldeman concludes. “But this all hinges on policymakers understanding and acknowledging their large and growing pension debt problem—and doing something about it.”
