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Teachers' $500 Billion (and Growing) Pension Problem

Author: 
Andrew J. Rotherham
Publication Date: 
November 11, 2010

Teacher pensions may not sound like a sexy or even high-profile issue, but keep reading: they're threatening the fiscal health of many states and could cost taxpayers thousands of dollars. And, like the savings-and-loan crisis at the end of the 1980s or the current housing-market mess, insiders see big trouble ahead in the next few years and are starting to sound warnings.

Today there is an almost $500 billion shortfall for funding teacher pensions, and that gap is growing. Ultimately taxpayers are on the hook for that money. But the problem doesn't just end there. The way teacher pensions operate is badly suited to today's teacher workforce, where 30-year careers are no longer the norm. The current setup penalizes teachers who move between states, switch to private or public-charter schools that do not participate in the pension system or leave teaching altogether. Meanwhile, it becomes financial suicide for teachers to change careers after a certain point, even if they no longer want to teach or are not good at it.