Blaming Teacher Unions for Unfunded Pensions
Most issues in education eventually come down to money in one form or another. Consider teacher pensions. Unfunded liabilities for these promises are estimated to be $500 billion ("The School Administrator Payoff from Teacher Pensions," Education Next, Fall 2013).
Reformers like to blame teacher unions for the situation. But the truth is that teachers do their part by paying into the plans. For example, teachers in California pay eight percent of their monthly paycheck into the California State Teachers Retirement System known as CalSTRS. It's the politicians who are to blame. They know that by the time the promised benefits come due, they will long be out of office. It is simply easier for them to kick the can down the road by underfunding pension obligations.
That's why the Employee Retirement Income Security Act known as Erisa needs to be revised to apply to public employees as well ("The Long, Sorry Tale of Pension Promises," The Wall Street Journal, Sept. 21). Erisa became law in 1974. It mandated that companies with pensions pay annual premiums for pension insurance and that companies actually fund their plans. Unfortunately, many companies did not do the latter. As a result, failing companies left workers high and dry. Nevertheless, when public employees, including teachers, were granted the right to bargain collectively, the lessons from the private sector were ignored.
There are two ways of addressing the issue. The most direct is to reenact Erisa to apply to all public employees. This time, however, Erisa needs sharp teeth. State and local governments that fail to make on-time and sufficient contributions to their pension plans would be penalized by losing the tax-free basis of their bond offerings. Eliminating that provision would force change.
The second is to make the pension system for teachers much less back-loaded. The way teacher pensions are presently designed, pay in the early years is extremely low. The only path for teachers to get a significant lifetime pension is to work at least 25 years. If the system were more front-end loaded, teachers would receive much higher salaries in their early years in exchange for accepting a reduction in their pensions.
I think the first solution is far better. Not all teachers who make the classroom a lifetime career are burnouts by any means, despite what critics often claim ("Why Teacher Pensions Don't Work," The Wall Street Journal, Jan. 10, 2011). Why penalize them by reducing their pensions when they have paid into them in good faith? They deserve a financially secure retirement. Defined-benefit systems when properly run are the answer.