Leslie Kan's blog

  • Read about our latest research on inequities inherent in teacher pension plans, presented at the annual Association of Education Finance and Policy.
  • America’s next president may bring substantial changes to Social Security, depending on who is elected. Both Republican and Democratic candidates have presented their ideas for change (or no change) at the last few debates. Current positions primarily focus on expansion or reduction, but so far haven’t mentioned workers who lack coverage.  

    So what do the 2016 presidential candidates want to do to Social Security?  

    Democrats

    • Hillary Clinton says she will preserve benefits and enhance certain aspects of the program, such as benefits for vulnerable populations. She proposes lifting the payroll tax cap, broadening the tax base, and raising survivor benefits for groups such as widows and giving caregiver credits for those who have removed themselves from the workforce to care for children or ailing family members. 
    • Bernie Sanders proposes a broader expansion of the program with general increases to the minimum benefit and using a higher price index to make cost-of-living-adjustments (COLA) for more generous benefits. Similar to Clinton, Sanders also proposes lifting the current income cap, so that high-income individuals pay the same percentage on their income toward Social Security. Currently, high-income earners only need to pay Social Security taxes on a portion (the first $118,500) of their income. Sanders proposes lifting the cap, so that individual making over $250,000 will be taxed at the same percentage as other workers. 

    Republicans

  • Illinois’ $111 billion unpaid pension debt--over half of which is due to teachers--has prompted talk over a federal bailout. Illinois policymakers continue debating fixes without any real long-term solutions, let alone a budget

    But the $58 billion question remains: how well are Illinois teacher pensions actually serving its workers?

    Unfortunately, not that well. Despite its high price tag, Illinois’ teacher retirement plan is doing a poor job of serving the majority of its teachers.

    Last week, Chad Aldeman, Daniel Fuchs, and I released a report that examines the benefit structure for Illinois’ teachers. New teachers, in particular, face substantially lower retirement benefits than teachers hired before the recession. In 2011, in response to worsening financial conditions, the state legislature created a less generous plan for new teachers called “Tier II.” Tier II imposes on teachers a higher minimum service requirement (up from five to 10 years, making it more difficult for new teachers to qualify for a minimum benefit), a higher normal retirement age (meaning teachers have fewer retirement years to collect a pension), a less generous pension formula (calculating the final average salary from the last eight years of service instead of just four), and a lower, uncompounded cost-of-living adjustment (COLA).

    The graph below compares Tier II benefits for new teachers to the prior Tier II plan. Notice how the red line dips negative for the first two and half decades of a new teacher’s service. This means that a 25-year old Illinois teacher hired after 2011 won't receive a net positive retirement benefit until she's worked at least 26 years. Until then, she’ll pay a penalty just to participate in the system.  

     

  • Teach for America takes a bold stance on teacher compensation and benefits.
  • President Obama struck at the heart of retirement issues in his final State of the Union address: workers need portable benefits.