Pension Pilfery
“The teachers unions don’t just screw over kids, they also screw over new teachers. Millennials beware.”
The above tweet from Mike Petrilli, president of the Thomas B. Fordham Institute, pretty much tells the dismal story. To followers of Pension Tsunami, UnionWatch and Transparent California, the looming pension disaster for taxpayers is not news. But what has gone under-reported is that young teachers entering the field are carrying a disproportionate amount of the load. And if those teachers don’t make teaching a career for life, they become victims of a reverse Robin Hood scenario – where the “haves” are stealing from the “have-nots” and the “haven’t yets.”
All this is spelled out in a Fordham Institute report authored by Martin Lueken, Director of Fiscal Policy and Analysis at EdChoice. As the introduction to the detailed 378 page analysis states, “A new teacher’s pension is supposed to be a perk. The truth is that for the majority of the nation’s new teachers, what they can anticipate in retirement benefits will be worth less than what they contributed to the system while they were in the classroom, even if they stay for decades.” The even sadder news is that, cowed by Big Union, no one in a position of power seems to be willing to do anything about it. (Emphasis added.)
Lueken found that the median “crossover point” of the fifty-one districts across the country he examined is 25 years, which means that teachers in more than half of these districts have to teach a quarter of a century before they reach the point where their retirement benefits are worth more than their contributions. This is outrageous.
Most teachers’ pensions come in the form of a defined benefit plan, whereby a teacher is guaranteed a monthly pension payment for the rest of her life after retirement. Much fairer to taxpayers and non-lifer teachers alike is a 401(k) defined contribution plan in which a teacher’s benefit is equal to his own contributions, those of his employer, and whatever earnings the investments accrue.
Just three months earlier, the University of Arkansas issued a working paper that focused solely on teachers’ pensions in California, and those results are not pretty either. Here in our Golden, or more accurately, Beholden State, two-thirds of teachers are “pension losers.” As described in the Orange County Register, “A teacher who starts her career at age 25…will have to work until age 53 before merely breaking even with her employer’s pension contributions….”
In California, the retirement fund is woefully underfunded to begin with. To soften the effects of the looming tsunami, CalSTRS, the state teachers’ retirement system, plans to reduce its “rate assumption” from 7.5 percent to a slightly less utopian 7 percent over three years. This means that teachers and school districts (the taxpayer) are going to have to make up the difference. And it’s the newer and lower paid teachers who, proportionally, will take the biggest immediate hit. As EdSource’s John Fensterwald reports, the hike will come in two steps. “Next year, they will pay an additional half-percent of their pay – an average of $200 annually to CalSTRS. Starting July 1, 2018 that could double to 1 percent, about $400 per year. About 80,000 teachers – those hired since 2013, who constitute about 1 in 5 teachers in the state – would be affected.”
And just how do the teachers unions, which demand defined benefit pension plans for its members, treat their own employees? As Mike Antonucci writes, when teachers unions become “the man,” they are no different than any other employer. The California Teachers Association pension plan for its employees is less than 80 percent funded, “which means the union will either have to reduce future benefits or increase contributions.” In fact, last August, employees of CTA held a rally outside the union’s headquarters, calling on the union to “secure” their pension benefits.
In Pennsylvania, Philadelphia Federation of Teachers president Jerry Jordan has long railed against using 401(k) retirement plans for his union’s members as a way to curb skyrocketing pension costs. Yet while insisting on a defined benefit plan for its teachers, the union’s 34 office workers are forced to enroll in a more realistic 401(k) plan.
The system we now have, where new teachers are being forced to pay for a service that many will never benefit from, must change. Teachers, new to the profession, need to stand up and push back against the powerful unions that so many are forced to pay dues to. If they can make enough noise, the unions’ bought-and-paid-for legislators may take notice. Taxpayers everywhere should join the bamboozled teachers and insist on a pension system that is equitable and fair to all parties.
Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.