In an article last week, The New York Times argued that the teacher pension system in Puerto Rico is little more than a legal Ponzi scheme. Virtually all of the contributions made by current teachers go to pay retirees because the system will be bankrupt next year. These younger teachers are paying for other people's retirement, but they can’t count on a pension of their own when they retire.
Simply put, Puerto Rico’s pension system is an accelerated example of pension problems in the rest of the country. Puerto Rico's finances are in even worse shape than the systems in Illinois or New Jersey. The problem of young teachers’ cross-subsidizing retirees at their own expense is even more pronounced there. But the pension crisis in Puerto Rico is where many states are headed if they don’t make reforms now.
Evidence that teacher pension funds have problems is growing. Media coverage of the issues is expanding. Yet, many teachers still are unaware that pension systems are struggling financially and failing to provide most teachers with a good retirement benefit.
In their defense, when I was teaching I was only vaguely aware that I was earning a pension. And to be honest I had no real sense of how the system worked. It turns out that even 30-plus year veteran teachers can be confused by complicated teacher retirement systems.
To help clarify these complicated issues, the Times also published a series of graphics that shed some light on teacher pensions, document the latest research, and explain how many of the current state systems truly fail to provide teachers with a valuable retirement benefit.
Citing research from us here at Bellwether and the Urban Institute, the Times piece provides two graphics demonstrating just how long it takes for teachers in every state to “break even.” For example, it takes teachers in Ohio 35 years of working in the classroom before they break even and earn a pension that is as valuable as their own contributions.
Finally, they show the percent of teachers in each state that will actually ever reach their break even point. It’s not pretty. The majority of states operate teacher pension systems that do not work for the bulk of their teachers.
These problems won’t fix themselves overnight. But, reporting like this will help to elevate the issues, show teachers just how poorly they’re being served, and hopefully lead to important reforms and retirement plans that better meet the needs of all teachers.