How Charter Schools Handle Teacher Pensions

Amanda Olberg and Michael Podgursky
Publication Date: 
June 22, 2011

In the wake of the economic downturn that began in 2008, public schools face serious and seemingly long-term fiscal challenges. Rising pension costs are a particular concern for school districts, whose dollars help prop up state retirement plans that often have substantial unfunded liabilities. Yet public school districts have no alternatives; almost all of them are joined by statute to state pension systems (or, sometimes, to their own local pension systems). But what about teachers employed by public charter schools that are not required to participate in state teacher pension plans? Do their retirement plans face the same challenges? What types of retirement plans do they use? 

Forty states currently have charter schools. In twenty-four of those states, teachers in charter schools must participate in the state plan. But in the other sixteen states, charters have the option of participating in the state’s pension plan for teachers, meaning the law offers access to the state retirement system but does not require membership. 

How often do charters avail themselves of alternative options? And what do they do instead? This paper examines data regarding the pension arrangements of “opt-out” charter schools in six states. Not only is this information interesting in its own right, but it could also point to ways that other states and districts might redesign their own teacher pension plans going forward.