Blog: Funding

Guest blogger Chris Lozier proposes another way to put unfunded pension liabilities in perspective.
Neither The New York Times nor teachers union leaders discuss how individuals lose out under current pension systems.
The California Public Employees’ Retirement System (CalPERS) recently announced 99 different types of compensation they consider "pensionable."
A new report from the National Institute on Retirement Security claims that state, local, federal, and private pensions contribute $555 billion to the American economy's GDP. But pensions don't actually contribute to GDP.
Accusations of being "out-of-date" should come with some proof.
The Census Bureau’s latest Public Education Finances Report is out, and it shows that employee benefits continue to take on a rising share of district expenditures.

Thousands of teachers and other public sector workers have been retiring in recent years, fueled in part by changes to their pensions. A January Governing magazine story found increased retirement rates in Georgia, Illinois, New Jersey, Ohio, Oregon and Wisconsin. Although this is often portrayed as a bad thing– the pension plan is pushing out scores of experienced workers!—new research from Maria D. Fitzpatrick and Michael F. Lovenheim in Education Next suggests we may not have reason to worry.

Faced with a budget crisis in the early 1990s, Illinois offered teachers a generous early retirement package. Large numbers of older, more experienced teachers took the offer, leading to a threefold increase in retirement rates. Over a two-year period, 10 percent of the total teaching workforce in Illinois retired.

None of the recent stories of mass retirements have been nearly as large as the 10 percent in Illinois, but what happened in Illinois can give us comfort that the retirements of today may not be as bad as predicted.

After the early retirement incentive program, Illinois had a dramatic influx of new teachers and a rapid decline in average teacher experience. The median retiring teacher had 27 years of experience and was replaced by a teacher with less than 3 years of experience. Across the state, average teacher experience declined and the number of new teachers increased substantially. All else equal, and since we know that teacher effectiveness rises with experience, we would have expected student achievement to go down.

But that’s not what happened. Instead, math and English test scores either stayed the same or went up. Importantly, those results held true for low-income, minority, and low-achieving students as well. There may be multiple reasons for this, but the massive retirements didn’t hurt student learning.

California's plan to pay down its $74 billion pension debt plan is simply staggering.
Retraoctive pay is unusual in its own right, but New York City Mayor Bill de Blasio has made some unique choices in how to distribute it.
What does New York City's new teacher contract mean for its pension plan?