Are Teachers' Pensions Safe?
I always believed that teachers' pensions were untouchable because state constitutions guaranteed them. But the news out of Detroit and Springfield calls into question my assumption. Although the issue in both venues is not limited to teachers' pensions, what is known so far is not reassuring.
Let's begin with Detroit. A federal judge ruled that public employee pensions are not shielded in a Chapter 9 bankruptcy, even though the Michigan Constitution explicitly protects them ("Detroit Ruling on Bankruptcy Lifts Pension Protections," The New York Times, Dec. 4). In Springfield, the Legislature voted to trim public retiree benefits, even though the Illinois Constitution expressly protects them ("Illinois Legislature Approves Retiree Benefit Cuts in Troubled Pension System," The New York Times, Dec. 4), and the governor swiftly signed the bill into law ("Illinois Governor Signs Bill for State Retirement System's Overhaul," The Wall Street Journal, Dec. 6).
Perhaps constitutional lawyers can venture an opinion whether teachers pensions are vulnerable. Public school teachers are public employees, but in most states their pensions come from a designated trust. For example, teachers in California contribute eight percent of each paycheck into the California State Teachers' Retirement System. Their pensions are not paid out of general operating revenues. The portion of state and local government spending dedicated to the retirement system is about three percent.
The pension crisis in Illinois was created by the failure of lawmakers to fully fund their promises. Illinois is the worst offender in overall pension liability, followed at last count by Ohio ($40.7 billion), Texas ($24.1 billion), Pennsylvania ($19.7 billion) and Michigan ($17.6 billion). It's important to emphasize that teachers in all states have kept their part of the bargain by paying into the proper trust, and yet they are now being blamed for the crisis. The same can be said for other public employees.
Courts are supposed to be the place where justice is served. But based on what I see, moral arguments will not prevail. Everything eventually comes down to money ("A wake-up call from Detroit," Los Angeles Times, Dec. 5). That's why I think teachers are in for a big disappointment about the inviolability of their pensions. The irony, of course, is that Congress bailed out the banks to the tune of trillions of dollars when they blatantly acted irresponsibly. Yet those who play by the rules are abandoned.