Blog: State Pension Plans

While traditional, back-loaded pension plans fall short of providing adequate retirement benefits to all members, there are better options. And, contrary to a public debate that often pits pensions against 401ks, there are other alternatives that would better balance the needs of employers and employees.
A new study provides evidence that teachers are not particularly sensitive to changes in retirement benefits. If anything, updating teachers’ retirement options could even free up resources to raise base salaries, which may ultimately affect the teacher workforce more than retirement benefits ever can.
Teacher pensions are more complicated than they appear, and that has implications for teachers.
Given the benefits to both the employee and the employer, states should expand existing portable retirement options offered to other state employees to teachers as well.
Teacher pay and benefits have made headlines over the past few weeks, with walkouts and strikes by teachers in Kentucky, Oklahoma, and West Virginia. Indeed, with so much unfolding so quickly, it can be hard to keep up.
Kentucky's move to a cash balance plan will be good for the state, and for future Kentucky teachers.

As a part of its ongoing teacher diversity series, the Brown Center on Education Policy recently published a piece looking at different incentive structures districts use to attract people to the education profession. They found that some incentives are related with an increase in educator diversity. These findings are instructive and districts may want to consider them as a part of their teacher diversity efforts. That said, our research suggests that even once a person of color enters the education profession, she likely will still face significant barriers to advancement and higher salaries.

The Brown Center’s study relied on 2011-12 Schools and Staffing Survey (SASS), which provides information on the context of public and private schools across the country. Among the race-neutral financial incentive policies they studied, they found that offering relocation assistance, loan forgiveness, and bonuses for excellence in teaching are associated with increased staff diversity. As such, they recommend districts interested in increasing racial diversity explore these racially-neutral financial incentive structures.

These findings are important in their own right. Nevertheless, diversifying the education workforce does not stop after recruitment. More must be done to address the fact that educators of color must contend with additional barriers once they enter the profession.

In our recent report we explored race-and gender-based salary gaps in Illinois. We found that women earn salaries that are on average $5,500 less than what men earn. As shown in the graph below, we also found significant gender-based pay gaps within races and ethnicities. Hispanic women, for example, earn on average $4,500 less in salaries than Hispanic men.

In a new report, we studied Illinois’ educator salary and tenure data, and found that women typically earn salaries that are $5,500 lower than their male colleagues. This pay gap continues into retirement, leaving women with lower annual benefits even if they worked the same number of years.
A new study of the Massachusetts Teachers’ Retirement System (MTRS), Robert Costrell and Dillon Fuchsman from the University of Arkansas finds that 74 percent of educators are pension “losers.”
Desperate times call for desperate measures, or so the saying goes. Staring down a financial crisis, Illinois is considering a fiscal Hail Mary: a massive fire sale on public debt. While Illinois’s finances certainly are in real trouble, issuing the largest public bond in history may do more harm than good. Here are 5 issues to consider.