Across the United States, growing unfunded pension liabilities have quietly slashed state education budgets, leaving fewer dollars for teacher salaries, classroom resources and other education priorities. A new report from Equable Institute has found the share of state education spending going to pension costs has nearly doubled from 7.5% in 2001 to 14.4% in 2018. The report is the first of its kind to quantify the effects of growing unfunded liabilities on the education system in detail.
Hidden Education Funding Cuts provides a state by state analysis of state education funding trends over the past two decades, and then adjusts that spending for inflation and pension costs to show what the ultimate effect has been of growing unfunded pension liabilities on K–12 resources.
Want to find out more about the hidden education cuts in your state? State specific reports and the national summary paper can be downloaded at Equable.org/hiddenfundingcuts.
What are “hidden education funding cuts”?
Since 2001, teacher pension plans have collectively fallen hundreds of billions of dollars behind in the savings levels necessary to pay all future promised benefits. Meanwhile, state K–12 education spending levels have generally been stagnant. Many states simply have not ensured education funding levels are keeping up with the increased costs created by pension funding shortfalls.
In an era when school districts nationwide are struggling financially, growing pension costs are exacerbating already-existing fiscal stress. The result is that less education money is available today for teacher salaries and classroom spending than there would be if teacher pension funds had been better managed over the past two decades. And that’s the hidden cut to education funding.
Where the national trend has seen hidden cuts nearly double from 7.5% to 14.4% of state K–12 funding going to teacher pension costs, the state to state results have varied. In Pennsylvania, exploding teacher pension debt has caused the rate of hidden cuts to surge from 2% to 34% between 2001 and 2018. The absolute hidden cut level has reached a similar 34% in 2018 for Illinois, up from 12%.
The effects of these cuts are felt particularly hard in high-need districts which have fewer local resources to draw on to fill in the gaps when education costs rise, creating less funding for teacher salaries and programs aimed at improving academic and other outcomes.
How did this happen?
Visit Equable’s interactive report website to dig into the details on how education budgets have stagnated while teacher pension costs soared since 2001.
To see how individual states stack up against each other in terms of how much their hidden education funding cuts have changed over the past two decades, see the chart below.
Anthony Randazzo is executive director at Equable Institute, a bipartisan non-profit working to create a safe, more secure retirement for public workers everywhere.