It pays to quit

More than 1,100 retired Illinois teachers receive pensions of $100,000 or more, complains pension critic Bill Zettler. A former driver’s ed teacher gets $103,000 year. (He must have worked a lot of overtime in his last four years of teaching.) Teachers can retire at age 55.

Zettler suggests giving teacher retirees $1 million at retirement to invest as they see fit. That would generate $40,000 a year for the teacher — more than the average pension of $38,076 — and save the state money.

In Michigan, public school employees who work for at least 10 years can retire and then go back to work at age 60 for 102 hours, re-retire and qualify for lifetime medical and dental benefits worth $150,000.

Paulette Strong, a former bus driver, went back as a teacher’s aide for three weeks to qualify, the Detroit News reports.

Retirement costs are strangling Michigan schools, which now pay $1,015 per student per year for retirees’ pensions and health care bills. That figure is expected to skyrocket in coming years, threatening the state’s already-strapped education system.

Via Teacher Quality Bulletin.

I just turned 55 and started receiving my pension for 22 years of work for Knight Ridder Newspapers. It’s less than 20 percent of my former salary, but still nice to have. I had no idea that I’d be eligible before 65.

About Joanne

Comments

  1. The retirement system along with affordable housing are major concerns for teachers.

    One of the reasons that retirement benefits are bankrupting the system is that teachers are living longer.

    I have a modest proposal:

    If the subsidized housing for teachers were built at or near toxic waste sites, that might help keep the retirement system solvent.

  2. wahoofive says:

    If you only get $40K income on a $1M investment, you’re not trying very hard.

  3. wahoofive: no kidding. that’s a pitiful 4% annual return. you should get that from a typical savings account.

  4. Mark Roulo says:

    If you only get $40K income on a $1M investment, you’re not trying very hard.

    You *can* take more out, but then you run the risk of hitting
    age 80 or so and being OUT OF MONEY.

    The long-term annualized *real* (after inflation) return of
    U.S. stocks has been about 7%. Most people who follow stocks
    don’t expect more in the future (I’d guess that most actually
    expect less). Long term, bonds have returned about 3% after
    inflation.

    Subtract out management costs for a mutual fund (1% maybe),
    and 4% may well be on the *HIGH* side of safety.

    -Mark Roulo

  5. wahoofive says:

    You can get 4% on municipal bonds. No management fees, no risk, and all tax-free, meaning it’s the equivalent of over $50K in taxable income.

  6. Elizabeth says:

    great — my tax payer dollars being used wrongly yet again — in the private sector we no longer have a pension — teachers should get the same treatment — contribute to your 403(b) and the system contribute a percent of salary based on how long you have been there — try living on that — geez — no wonder bad teachers love tenure — any teacher loves tenure — after three years you are set for life on my taxpayer dollars that could be better spent —

  7. retirement benefits are bankrupting the system is that teachers are living longer.

    I know in my state there were some loopholes like Joanne was talking about. It was a big scandal and the legislature closed the loophole. It would be interesting to find out who legitamately worked 20-30 years and retired and who came in through the loophole and how this has an impact.

    Pension actuaries can easily predict and account for increased longevity and set rates appropriately but I don’t know if they can account for loopholes that lead to corruption.

  8. The reason pension systems are in trouble is the state’s tendency to raid the fund for ready cash.

    Those of you who think teachers should be treated as badly as you are by the private sector, why? Do you always think we should play to the least common denominator, moving everything into a downward spiral? “I don’t have it, so you shouldn’t either”?

  9. Walter E. Wallis says:

    I agree with funded pensions. If Ford had not burdened itself with a pay as you go system they might still be solvent today. Interesting watching the unions play chicken, milking Ford just short of bankruptcy. At the very least, government compensation packages should not exceed those in private industry.

  10. trotsky says:

    Well, if they get 2% at 55 or some similar formula, the way they do in California, it’s not at all surprising that a long-tenured med school professor might accumulate that much of a pension. And indeed, four docs and a former U of Illinois basketball coach led the list.

    But I can only imagine what pictures of the superintendent this $181K drama teacher has locked in a safe somewhere.

  11. Wayne Martin says:

    The following is from the Illinois Teachers’ Retirement WEB-site:

    http://trs.illinois.gov/subsections/press/info.htm
    Members
    TRS serves a total of 325, 593 members, including:
    • 159,272 active members, average age: 42
    • 81,218 inactive members
    • 85,103 annuitants and beneficiaries, average age: 70
    • Average age of active member at retirement: 59
    Benefits
    • Average monthly retirement annuity: $3,173
    • Average monthly disability benefit: $1,807
    • Average monthly survivor benefit: $1,127

    With about 85% of those drawing out of the fund, having a few over $100K is not unexpected. What is important is to look at the average monthly draw for the system as a whole.

    The US Social Security average benefit for 2004 was: $954.90. So, teachers make a lot more in their retirement benefit than the average person, and they tend to retire at a younger age.

  12. You still have to vest in the system, and your benefits are based on a combination of years you worked and highest pay, and you pay into the system as well although your benefits will most likely greatly exceed what you payed in.

    I agree that the retirement benefits are better than most in the private sector, but that’s one of the few perks of teaching, along with number of days off and typically good health benefits.

    If we decide to revamp the system to make it more comparable to the private sector, we should probably recognize that it makes public school teaching less appealing as a career to the good teachers as well as the bad.

  13. Wayne Martin,

    In your claim that teachers make more in retirement than the average person, as you assuming that the average person’s retirement is only Social Security or was there a different stat that I missed?

    You should probably also note that many teachers will claim Social Security in addition to the teaching retirement, but, hey, they paid in just like everyone else.

  14. sorry, I meant “are you assuming”

  15. Wayne Martin says:

    > I agree that the retirement benefits are better than
    > most in the private sector, but that’s one of the few
    > perks of teaching, along with number of days off and
    > typically good health benefits

    Which has traditionally be the justification for salaries that are somewhat lower than in the private sector. Unions, and greed, have tried to drive the salaries to greater than in the private sector, however. The results will be devastating for public sector finances.

    > In your claim that teachers make more in retirement
    > than the average person, as you assuming that the
    > average person’s retirement is only Social Security or
    > was there a different stat that I missed?

    Since the US’s households have long ago become two-earner entities, it’s reasonable to expect that both earners would have some sort of retirement benefit. Teachers are 3/4s women, so their retirement benefits would not be expected to be the only retirement income. Additionally, about 50% of US households own stocks these days—so there is reason to believe that teachers are in that 50%. Income from dividends and sale of stocks would increase the income retirees would receive—although this requires that teachers took the initiative of retirement planning during their working years.

  16. I’d like to ask this question generally: is it right to change the retirement system for teachers who have already vested?

    Would it be acceptable for my state to come to me and say, instead of the assured fixed benefits that we’ve told you for half of your expected career that you would earn, we’re instead going to roll your contributions with the (relatively low) interest they’ve earned in the system into a private account for which you will assume responsibility with no guarantee of retirement benefits?

    I know it happens in the private sector all the time.

    I just don’t know if it’s smart to make teaching even less attractive compared to the private sector. And, if you change retirement and benefits, many of the incentives for mid-career teachers to stay in teaching kind of disappear. They could take their private accounts with them to new jobs.

  17. Wayne Martin says:

    > Would it be acceptable for my state to come to me
    > and say, instead of the assured fixed benefits that
    > we’ve told you for half of your expected career that
    > you would earn, we’re instead going to roll your
    > contributions with the (relatively low) interest they’ve
    > earned in the system into a private account for which
    > you will assume responsibility with no guarantee
    > of retirement benefits?

    > I know it happens in the private sector all the time.

    Well .. you have answered your own question.

    Another question that needs to be asked at times like these is:

    Is it right for a government to promise things it can not easily deliver without taking from one group and giving to another?

    Health care and retirement benefits for public sector employees has been badly managed (at least in the aspect of matching future revenues to future liabilities) here in California:

    —–
    http://www.sacbee.com/103/story/194586.html

    CalSTRS funding still lags
    Teachers’ pension plan narrowed its shortfall, but is still about $19.6 billion below its obligations.
    By Gilbert Chan – Bee Staff Writer

    Published 12:00 am PDT Saturday, May 26, 2007
    Story appeared in BUSINESS section, Page D1

    Surging stock markets and three straight years of strong investment returns have pared billions from a long-term pension shortfall plaguing the California State Teachers’ Retirement System in recent years, but it’s not enough.

    The state, school districts and teachers still will be forced to dig deeper into their pocketbooks to erase a projected $19.6 billion gap over the next three decades, according to a new report for the nation’s second-largest public fund.

    Moreover, coming up with the money won’t be easy and should stir debate in the coming year as lawmakers, school administrators and educators grapple with cash-strapped budgets and financing future retiree health care liabilities likely to top $100 billion in California. At the same time, Gov. Arnold Schwarzenegger also has convened a special commission exploring public employee pension benefits.
    ——

    One obvious solution to back out of the obligations.

  18. Ragnarok says:

    Particularly when these excessive benefits were obtained via threats and extortion, not to mention that they do a crappy job.

    But hey! what’s a few excessive benefits between friends?

  19. Because teachers retirement is better than average, it’s excessive? That’s an interesting standard to use. Do you apply it to public safety and services too?

    Wayne Martin, I wasn’t asking if the state could do it. I was asking if you thought it would be ethically right for the state to do it.

    Once the state has made the promise and gotten the services that it contracted for from the employee, is it right for the state to change the terms of the deal?

    I’d say no. It bothers me more that the gov’t does this to former members of the military than that they do it to teachers, but I think it’s wrong in any case.

    It seems to me that it’s the obligation of the government to pay people currently in the system according to what was agreed to although it would be fine (counterproductive to attracting better teachers but ethical) for the state to set up a new system for new hires or to present people presently in the system with the choice to privatize their accounts (which could actually be attractive depending on the state of the stock market at the time).

    The nature of having public employees is that you tax other people to pay them, so you’re going to have to take from one group to give another what you’ve promised no matter what.

    Voters should pay more careful attention to the promises being made on their behalf so that they can fully appreciate the changes to their tax burden although I find Ragnarok’s language of threats and extortion ridiculous.

  20. Ragnarok says:

    “Once the state has made the promise and gotten the services that it contracted for from the employee, is it right for the state to change the terms of the deal?”

    But it hasn’t, has it?

  21. Wayne Martin says:

    > It seems to me that it’s the obligation of the
    > government to pay people currently in the
    > system according to what was agreed to

    This is fine as long as the money to pay the retirement benefits is available. But when our legislators recklessly spend beyond the revenues of the State, where is this money to come from? Here in Santa Clara County, the County Supervisors have taken to selling bonds to pay for retirement benefits for County employees. So—we are now paying two dollars for every dollar of benefit received by County retirees. This is madness—but you won’t hear one County employee speak out about this approach to paying their retirement benefits.

    The US (all levels of government) is now about $9-10T in debt—held by government to pay for promises we felt we had to keep. How ethical is it to promise something that drags you into bankruptcy?

    > Voters should pay more careful attention to the
    > promises being made on their behalf so that they
    > can fully appreciate the changes to their tax burden

    Try and talk to a legislator about expenditures. They will openly tell you (if they will speak to you at all) that they were elected to “give the voters goodies”.

    > I find Ragnarok’s language of threats
    > and extortion ridiculous.

    This is how Unions deal with the industries that employ them. Labor history is replete with examples of this behavior. Look at the stevedores, the Auto industry and the Steel Industry for the most violent examples. (Well .. the steel industry is gone now, for the most part. Even the Unions began to realize that 4-6 month strikes were counter-productive by the 1970s, and have not been as difficult to deal with. It’s a shame that educators don’t know much about labor history in the US.)

  22. Bill Leonard says:

    The so-called “ethical” arguments can go on all day. NDC, it comes to this:

    You and your colleagues are at the point where you are asking taxpayers such as myself to tax ourselves yet more heavily to provide you and your colleagues a better retirement that I will have — and in the process, also contribute to ongoing fiscal irresponsibility.

    What do you think my answer is likely to be? Exactly.

    Bill

  23. I’m not sure that “contributing to ongoing fiscal irresponsibility” is necessarily part of honoring the retirement benefits that teachers were promised. Had the state actually invested the retirement benefits properly, it’s possible that the system wouldn’t be in this position today. Cutting the benefits to teachers, which certainly the easiest way, probably isn’t the only way to make the system solvent, assuming that you expect anything connected to government spending to actually be solvent.

    It seems to me that because the gov’t goofed up as they often do when it comes to distributing the spoils that don’t really belong to them, you now want to renege on a promise made to teachers, who while some of you want to vilify certainly were not responsible for the mismanagement of the retirement system. Why would it be appropriate for retired teachers alone to pay for the mistakes made by elected representatives of the state or their agents? How would that do anything to encourage fiscal responsibility, as it really just shifts the burden to another set of tax payers?

    As I’ve pointed out before, I’m not in a big union state, so the evil influence of unions to extort doesn’t explain why my particular state government would have made the promises that it did. Nor would it explain why the retirement system wasn’t managed better. So while it may make sense to some of you to assume that teachers should make up the shortfall that they’ve somehow created through nefarious methods, it doesn’t explain as much to me.

    Bill, I seriously doubt that I’m going to have more money in retirement than you will. It’s nice rhetorical flourish, but it’s not likely to be true unless you’ve failed to plan for retirement at all. And if it does come to pass that I do, it’s probably going to have more to do with private retirement accounts that only I’ve payed into.

    And even if it were true, wouldn’t it be a good idea to have some incentives for people to go into public school teaching that actually exceeded what could be found in private employment? If pay, benefits and retirement are comparable to those is the private sector and the working conditions for the most part much worse in teaching, why would anyone with other options choose teaching as a career?

    I ask this sincerely: are you hoping for the end of public schools? Unless that’s what you are hoping for, and sometimes I’m conflicted on that point myself, it’s hard to see how you will continue to find employees, particularly if the perception is that you don’t like the quality of the ones you are getting now, if you cut the benefits for the job.

  24. Oh, and Wayne, it’s not that I don’t know labor union history: it’s just that I don’t think it has much to do with this instance. I don’t think that the situation with teacher retirement is linked to strong arm tactics by the unions. I think it’s primarily a function of government mismanagement of the funds placed into the system.

  25. Charles R. Williams says:

    I am sure that there are perverse incentives in the teacher retirement system. The real problem though is that that some states have not set aside the funds required to meet their obligations to retirees.

    Ohio has a fairly well funded system. Teachers pay 10% of their incomes and the employer pays about 15% – some of which covers the unfunded liability. Teachers are not in the social security system and so a pension of 90% of final earnings (all taxable) at the end of a lifetime career is not far out of line with a traditional 30 year defined benefit private pension (taxable) together with social security (non-taxable and COLAed). It is not out of line either with social security plus an employer subsidized 401k program.

    By the way, if a person has a pension from a system where he is not subject to social security together with social security from a prior job, the social security benefit is reduced.

    To qualify for a subsidized medical benefit, the retiree has to have 15 years in the system and this works on a sliding scale. There are no guarantees that this benefit will be continued indefinitely.

    It is not common in Ohio for a teacher to be in a position in his late fifties/early sixties where he is losing money by staying on the job. Some people who wish to continue teaching go to a private school.

    If vouchers were implemented on a wide scale the entire system of teacher compensation would come crashing down, including teacher retirement systems.

  26. Ragnarok says:

    “And even if it were true, wouldn’t it be a good idea to have some incentives for people to go into public school teaching that actually exceeded what could be found in private employment?”

    Incentives like tenure, guaranteed pay raises, lack of accountability, long summer vacations? Oh wait, I forgot, you already have those, don’t you?

  27. Bill Leonard says:

    NDC, what you basically are saying is, you may have made no plans to take care of your own retirement. The government somehow bungled the money it collected:

    “…because the gov’t goofed up as they often do when it comes to distributing the spoils that don’t really belong to them, you now want to renege on a promise made to teachers…”

    Please understand that it is not my problem that you believed union and government promises that provably have been meaningless in the past. You perhaps have not made arrangements for your own retirement in the event the government faucet was turned off.

    Well, too bad. Do not expect me to vote for tax increases to pay for your misjudgements or the government’s usual incompetence. Given the opportunity, I will of course vote no.

    And yes, at the top levels, the teacher’s retirement package is far better than I will enjoy. I have built in certain safeguards, such as the investment in rental property, that, while no means a sure thing, have. certain advantages. That you did not, or do not, is not my problem. If you live in California, no, don’t expect me to vote to increase taxes to make sure you can retrieve the promises made by politicians or negotiated in a short-sighted mode by your union reps.

    Bill

  28. So, Ragnarok, you’re more than satisfied with the quality of people going in to teaching? Good to hear the incentives are working.

  29. Bill,

    Your expectation is that people who work for the state shouldn’t believe their contracts?

    Despite being assured that my employer had a benefit package that guaranteed me certain retirement benefits, based on my paying into the system for 30 year, it would be my fault and lack of planning if the government defaulted?

    Wow. Do you hold people who work from private companies to the same standard?

    Each of us is obligated to have private savings to cover all our retirement expenses and we should just forget about any employment based benefits? Well, it would solve the social security systems problems, wouldn’t it?

  30. I honestly think the government has a moral obligation to honor the contracts that it makes with people. It’s interesting to me that you all don’t.

    Do you feel the same way about members of the military who are told to expect one level of life-long health care as part of the compensation for serving and then find that the standard of care has been greatly reduced when they actually need it? You would essentially say, “sucks to be you for believing the government?” Or do you just have a particular animosity toward teachers?

  31. Ragnarok says:

    Hmm, I was actually pointing out that these excessively generous benefits have attracted quite the wrong kind of person (usual caveats apply, as for any generalisation). I thought my point was quite evident, but apparently not.

    Once you get your foot in the door it’s almost impossible to fire you, so you can safely resort to extortion (strikes, refusing to write letters of recommendation etc.) to get more and more unreasonable benefits. The politicians don’t care – why should they?

    But then – and this is the cruelest cut of all – you bite the (governmental) hand that fed you, accusing it of incompetence. Well, they’re incompetent, sure; they fed you, didn’t they? but that’s rank ingratitude, don’t you think?

  32. Bill Leonard says:

    NDC, comparisons between career miltary personnel and other categories of government employees — i.e., teachers — is an apples/oranges argument at best, and specious at worst.

    Among the differences: while on active military duty, those serving and their dependents receive free medical care. There are housing, food and other allowances. Retired military get a better deal on groceries, clothing at other items at the nearest PX or other military exchange than ever I will.

    And I don’t begrudge that. Most career military folk have dealt with personal and professional situations that dwarf whatever you may have faced in your classroom. Try to trust me on this; although I was not a career military person, I am a Viet Nam-era veteran.

    Another point: unless the case is that of a general officer, military folk generally can retire with 20 to 30 years of active service. That means people can retire at, say 38 to 48. Should they be expected not to work again? Most in fact go into government service; there are preferential hiring policies for retired military in the federal government and in most states. Potentially, one can retire at 38 and work for, say, the Post Office, for another 25 years or so while drawing a military retirement.

    On the other hand, as a teacher, you seem to be saying that, because your union negotiated a contract that may not now be financially fulfillable, the rest of us should tax ourselves so that you can get yours? Rationally, would you make the same decision if you were not a teacher? I doubt it.

    Bill

  33. Ragnarok says:

    “Do you feel the same way about members of the military…?”

    Well, no. Because they do their jobs – and you don’t.

  34. Wayne Martin says:

    > I wasn’t asking if the state could do it. I was
    > asking if you thought it would be ethically right
    > for the state to do it.

    Yes, I do.

    > Once the state has made the promise and gotten
    > the services that it contracted for from the employee,
    > is it right for the state to change the terms of the deal?

    If the retirement benefit is downsized prior to a person’s retiring, then the services have not been received from the employee in full.

    > Nor would it explain why the retirement system
    > wasn’t managed better.

    This retirement system “mismanagement” is not restricted to teachers’ retirement funds, as this problem can also be found in every level of government offering retirement benefits. The problem is that the dollar amounts for fully funding these systems is enormous, and few elected representatives have ever been intelligent enough to demand of the professional staff a complete accounting of the retirement liabilities until recently. GASB 45 (for instance) has only recently produced by the GASB (Government Accounting Standards Board) organization. This standard requires that governmental entities begin to elevate retiree health benefits to a level of visibility that was heretofore unknown. GASB standards do not carry the power of law. So, governmental entities are free to adopt them or not. Luckily, most do.

    We would all be a lot better off if there were laws that required governments to provide a clear revenue stream to pay for benefits that are promised. I have watched in my town where our City Council promised so very sweet retirement packages, only to find out 8-10 years later that the bloom was off the rose here in Silicon Valley and the City’s revenue stream was decreasing, not increasing. The people who made the promises are long gone.

  35. Bill,

    I’m not a member of a union; I live in a right to work state and my state actually forbids teachers from engaging in collective bargaining.

    It’s really difficult to see why I’m supposed to believe that the union or teachers are responsible for negotiating a retirement deal so excessive that it would be ethical for the state to abandon the agreement.

    (While my state’s retirement is better that most private sector jobs in that it guarantees a fixed benefit, it’s not so generous that it feels like extortion. I suspect that it’s comparable to what I would have earned investing my contribution and matching funds in a 401K over the course of my career, (maybe even just my share without matching funds; it depends on the investments, of course) but because the state hasn’t actually invested the funds wisely, I don’t think the money is really in the system to fund the retirements. The state seems to be at the “how we will use creative bookkeeping to mask this problem” stage of addressing the issue.)

    And I’m not up on California teacher retirement enough to even address whether the package of benefits really is excessive, but I’ll mention an idea that has occurred to me before: if Californians like you, Ragnarok, and Wayne all feel so completely disenfranchised politically that you think the state is simply at the mercy of unions, why do you stay? Seriously, I don’t think I’d live in a state where the citizens were completely unable to elect people who can resist the will of the unions.

    I’ll just say again that I think the government has an obligation to honor its agreements with people who work for it, teachers, military, police, whatever. I don’t consider the employment and retirement benefits for teachers to somehow be an undeserved entitlement; I see them as an obligation that the government accepted in using the employees’ labor. (Again, maybe if I lived in California, I’d feel different about it because I would recognize the unchecked power of the union. But seeing as my state doesn’t the same degree of union influence and we still face a teacher retirement crisis, I’m skeptical.)

    I suspect that the teacher retirement system could be made solvent without a big reduction in retirement benefits, but it would require allocating more money to the system. In my state, this could be accomplished, maybe without increasing taxes overall, because money could be reallocated from other parts of the education budget or even from lottery funds. I’m not sure why you are so committed to seeing it as an either/or: cut benefits or increase the tax burden on everybody. Maybe that’s the blue state way, I don’t know.

  36. Bill Leonard says:

    NDC,

    “…if Californians like you, Ragnarok, and Wayne all feel so completely disenfranchised politically that you think the state is simply at the mercy of unions, why do you stay? Seriously, I don’t think I’d live in a state where the citizens were completely unable to elect people who can resist the will of the unions.”

    Not all of the state is at the mercy of labor unions, but significant areas — the SF Bay Area, for instance — are. This has given rise to perverse kinds of local legislation with such titles as “living wage” that de facto lock out or disqualify, on public projects, bidders that are not union.

    For decades the California Teacher’s Association (CTA) has basically been a conduit for dues money from the membership to the Democrat party.

    Earlier this week there was an interesting item in the back pages of the San Jose Mercury News to the effect that the state teacher’s retirement fund faces roughly a $20 billion shortfall over the next two years. Where do you think that money really will come from?

    And finally, there are many reasons why one may stay in a particular area, including family, occupational and other obligations or desires. But trust me, when my wife and I finally decide to really retire, it won’t be in California.

    Bill

  37. Ragnarok says:

    “I suspect that the teacher retirement system could be made solvent without a big reduction in retirement benefits, but it would require allocating more money to the system. In my state, this could be accomplished, maybe without increasing taxes overall, because money could be reallocated from other parts of the education budget or even from lottery funds.”

    Ah, yes, like from where? Here in sunny California education takes a very large chunk out of the budget, so most of the money is already taken.

    Note that stevedores and other unionised groups don’t often go on strike, because they’ve realised that it hurts them. One might ask why teachers haven’t grokked it – but perhaps that’s an unfair question; they’re the only ones who’ve been to Ed School.

  38. Bill,

    I don’t know where the money will come from. I don’t even know how big that amount is compared to the average budget for the state of California to fully appreciate the scale of the problem.

    But I don’t think that it’s ethical for the state unilaterally to changed the terms of retirement for people already vested in the system as the method of addressing that shortfall. That’s it.

    If the state wants to go 401K for new hires and give teachers already in the system the option to do so, that’d be fine, and maybe if Ragnarok is right the other benefits for California teachers are good enough, it won’t even make it harder for the state to attract new teachers. (I don’t most new teachers enter the profession thinking about retirement anyway.)

    But to suggest that the way to address the shortfall is to default on the pensions of those vested in the system isn’t right.

    (I suspect those of you in California would pick the expenses back up in a different part of the budget anyway as the state rushed in to make sure they took care of everyone. The benefits would just stop being tied to labor and earnings. )

  39. Ragnarok,

    Are you just insulting teachers as a rhetorical time killer?
    Do you imagine that you seem witty and persuasive?
    Are you just a bully and you hope to get a rise out of me with this nonsense?

  40. Wayne Martin says:

    It’s really difficult to see why I’m supposed to believe that the union or teachers are responsible for negotiating a retirement deal so excessive that it would be ethical for the state to abandon the agreement.

    > why do you stay?

    Because this is the center of the computer industry. There really aren’t that many development centers in the US for highly talented computer developers.

    And as noted by another poster—California might not be the best place to retire. Prop.13 is making it acceptable for those who bought their homes before 1985, but for those who purchased after 1990, the property taxes could easily be more than $10,000 a year now and will only be more later. This generation of home owners will likely have to sell and move out when it’s there time to retire in 20 years.

    Oh, and your idea about a two-tiered benefit system has been tried in the private sector here in California. The supermarkets in LA tried it a couple of years ago. The labor union representing these people went berserk and went on strike. (I can’t remember at the moment if this two-tiered system survived the strike, but it is definitely not popular with the unions.)

  41. “Your expectation is that people who work for the state shouldn’t believe their contracts?

    Despite being assured that my employer had a benefit package that guaranteed me certain retirement benefits, based on my paying into the system for 30 year, it would be my fault and lack of planning if the government defaulted?

    Wow. Do you hold people who work from private companies to the same standard?”

    If you are depending on a contract with a private company that is spending itself into bankruptcy, you are going to lose. You’ll wind up splitting whatever value the bankruptcy court manages to extract from the company’s carcass with all the other creditors – which usually means everyone loses a large percentage of what they’re owed.

    However, this shouldn’t happen with private pensions (barring major stock market upsets), because private employers are required to put away the money to cover the pensions as the future obligations are incurred. Private employers would go to jail if they did what government officials routinely do – airily promise huge pensions in the distant future, and do nothing to save up the money needed to cover them.

    So, I’m somewhat sympathetic to the claim that government employees are owed the pensions they were promised – but far less for a teacher than for a garbageman (for example). Teachers are supposed to be educated, capable of doing arithmetic, and aware of what’s going on in the world. If you’re shocked to find out that you were relying on a fraud for all those years, it makes me doubt whether you were qualified for the job in the first place.

  42. Well, I’d think a two tiered system would be more popular with the unions than the gov’t defaulting complete or a huge reduction of benefits for everyone, but it’s possible that the relationship between elected officials and the unions in California is such that the unions don’t see you having the political momentum to prevent the complete bailing out of the present system with tax dollars.

    But even if that were the case, it would seem to me that the voters of California were more responsible for the outcome than teachers were for wanting the benefits they were told they could expect. The unions can only get what the elected officials and the voters will give them, right?

    Maybe the retirement crisis and the union’s reaction to it will give non-union voters an issue to exploit in reducing the influence of the unions. Has anybody sponsored right to work legislation lately? What would it take to get it on the ballot as a proposition directly in front of voters?

  43. “If you’re shocked to find out that you were relying on a fraud for all those years, it makes me doubt whether you were qualified for the job in the first place.”

    Can anyone name an example of a state defaulting on the retirement benefits of a group of employees? I can’t think of any, but it doesn’t mean they’re not out there.

    I’m a little confused about exactly what you mean by my “relying on a fraud”? Do you mean the government generally is a fraud or that I should have realized the retirement system was underfunded and mismanaged?

    If you mean that it’s underfunded and mismanaged, yeah, I did have some awareness of the problem, but it was my expectation that the state, which isn’t California by the way, would have to adjust the funding of the system to compensate. It did not occur to me that the proper solution would be to adjust benefits downward for the one group who did dutifully pay in.

    And in my state there does seem to be an awareness on the part of teachers and government officials that it’s a issue that must be solved, rather than something to be ignored in an ever increasing contract negotiation.

    As I said before, we’re at the shift the problem around level, but my expectation is that we’ll start seeing efforts to address the problem: forgoing cost of living adjustment for working teachers to put additional money in the system, for example. We currently have a lottery that funds college scholarships, but so far no one has actually passed legislation to keep the funds defined as solely for that use although it’s discussed. I can see that the lottery funding could be used as a bail out. The situation isn’t as dire as it is in California, I don’t think, so I think we’re talking about an easier problem to solve.

  44. Bill Leonard says:

    “Has anybody sponsored right to work legislation lately? What would it take to get it on the ballot as a proposition directly in front of voters?”

    Such a ballot proposition went to California voters in 1958, when I was still in high school. The measure was crushed at the polls, and it effectively ended the political career of then-Gov. Goodwin J. Knight. I don’t expect to see it on the ballot in any serious form again in my lifetime.

    “The unions can only get what the elected officials and the voters will give them, right?”

    Please recognize a crucial difference between unionized private industry and the unionized government sector:

    In the private sector, the management negotiating team typically is watching out for the company’s and the shareholder’s interests.

    In the public sector, school administrators and elected school boards are playing with someone else’s resources, commonly known as taxpayer dollars. And it’s alwasy easier to give away someone else’s money.

    Caveat: in times past, private industry ahs done the same thing. The Big Three auto makers in this country now have a difficult time being competitive because of costs relating to pension obligations granted in the 1950s, when there was no non-US auto competition and when there were two economies — the US and the rest of world. I have no doubt that no one then could have foreseen the problems such obligations would create 50-odd years later.

    The moral, and it is one that government has yet to learn, is, it is not wise to spend money just because and economy is booming and the coffers are flush. It will not always be so; it never has been, and never will be.

  45. Bill Leonard says:

    “Has anybody sponsored right to work legislation lately? What would it take to get it on the ballot as a proposition directly in front of voters?”

    Such a ballot proposition went to California voters in 1958, when I was still in high school. The measure was crushed at the polls, and it effectively ended the political career of then-Gov. Goodwin J. Knight. I don’t expect to see it on the ballot in any serious form again in my lifetime.

    “The unions can only get what the elected officials and the voters will give them, right?”

    Please recognize a crucial difference between unionized private industry and the unionized government sector:

    In the private sector, the management negotiating team typically is watching out for the company’s and the shareholder’s interests — in other words, management is negotiating for management.

    In the public sector, school administrators and elected school boards are playing with someone else’s resources, commonly known as taxpayer dollars. And it’s always easier to give away someone else’s money.

    Caveat: in times past, private industry has done the same thing. The Big Three auto makers in this country now have a difficult time being competitive because of costs relating to pension and benefit obligations granted in the 1950s, when there was no non-US auto competition and when there were two economies — the US and the rest of world. I have no doubt that no one then could have foreseen the problems such obligations would create 50-odd years later.

    The moral, and it is one that government has yet to learn, is, it is not wise to spend money just because the economy is booming and the coffers are flush. It will not always be so; it never has been, and never will be.

  46. Well, yes, it is easier to give someone else’s money away, but only if those people will elect you.

    At some level, the public school system and state funding generally are under the control of elected officials. And if they give too much money away, you can vote them out of office or if they’re endorsed by the unions not vote for them in the first place, right?

    More and more I come back to the idea that what’s wrong is not excessive teacher benefits, it’s the constituency of the state of California.

    But it still doesn’t make reneging on retirement benefits ethical.

  47. Ragnarok says:

    You’re getting away from the main point here: The teachers’ unions have persuaded our elected officials to give them unaffordable benefits, not to mention undeserved. Now the bill is coming due, and the taxpayers are beginning to rebel.

    To argue that we could vote the elected officials out etc. is to shirk your responsibility. Are we to believe that the politicians did this out of the goodness of their hearts? Of course not. The unions used carrots and sticks, and you bear responsibility for that. Shouldn’t you have voted your union leaders out? Of course you should! Why didn’t you?

    Legal doesn’t mean right, and what the union and the politicians have done is flat wrong. Maybe we could stomach some of it if you were at least doing the job – but you aren’t.

    Want to be treated like professionals? Behave like them.

  48. Ragnarok,

    Who are you talking to?

  49. I will again point out that I’m not a union member; I work in a right to work state, and my state forbids collective bargaining by teachers.

    We too presently have an underfunded teacher retirement system: how could this be if the union is mainly to blame?

  50. Wayne Martin says:

    > We too presently have an underfunded teacher
    > retirement system: how could this be if the
    > union is mainly to blame?

    Yes, the “union” was not directly responsible for this situation. However, don’t believe that it was not indirectly responsible for one minute. There is a very clear linkage between school districts locally, statewide and nationally, where compensation levels are concerned. School boards routinely acquire data on salary levels from other districts in order to stay “competitive”. Union activity in one state can “bleed” over to another as pressures on wage floors continually push wages up.

    As to the underfunding of the retirement system, this becomes a matter where checks and balances have been stripped out of state government. One would like to believe that the State Board/Department of Education would have taken on the job of monitoring the appropriate funding of the teacher retirement system. Usually there is an entity that is responsible for managing this money (in the case of Georgia it’s http://www.trsga.com/). Teachers have an obligation to keep track of these people. This responsibility also falls on the shoulders of each school district in the state. Certainly there are plenty of people available to keep track of the investment practices and the reserves of this entity.

  51. Oh, you know what? After more careful review, my state’s system is currently funded at 98% of expected costs, down from 101% the year before.

    Maybe it is the nefarious unions after all. Have you compared the funding in union states vs. non union states to see if it does really explain the difference?

    Carry on Californians! Good luck!

  52. Wayne Martin says:

    > After more careful review, my state’s system
    > is currently funded at 98% of expected costs,
    > down from 101% the year before.

    Then why did you repeatedly claim it was underfunded?

    > Have you compared the funding in union states vs.
    > non union states to see if it does really explain the difference?

    Nope. Not my job.

  53. Just as a sheepish explanation of why I though things were mismanaged and underfunded in my state, I offer this as a sample of news coverage:

    “The most frequently asked question by Georgia’s educators who are members of the Georgia Teachers Retirement System is: How much did TRS lose in the Enron investment, and how does it affect our retirement fund? Georgia lost about $127 million with the downfall of Enron Corporation, and about $79 million came from TRS funds. TRS has assets of about $40 billion, and $79 million is a very minor part of the portfolio. However, GAE raised concerns that the investment managers of TRS did not initiate a sell trigger on the investment, which could have notified TRS that the portfolio’s expectations were decreasing, and that the stock should be sold. Many state retirement systems did incorporate this type of sell trigger; as a result their losses in Enron were minimized.”

    So apparently we can afford to lose 70 million and still be nearly completely funded.

    With reports like this, do many of you still believe that Georgia teachers should assume that their retirement is a fraud and that they’re foolish to believe that the government will honor their retirement?

  54. And I’m looking for additional coverage, but there was a desire to shift the accounting of some retirement figures back to the counties that seemed really suspicious last year as well. But the more I think about it, the more it may have been health benefit related, rather than retirement.

  55. Wayne,

    It might not be your job to compare, but also could offer a few example states that are both union and solvent. Such states could offer an example of reform for California maybe.

    I realize that the unions make a really easy scapegoat, but if they’re as entrenched as you guys say, you’ve got to figure out a way to work around them or recognize that you have to leave the state at the earliest opportunity.

    Sitting around and crying about the evils of the union doesn’t seem to be bringing about reform.

  56. trotsky says:

    Is this the Bill Leonard commenting here?

    Board of Equalization keeping you busy this Wednesday morning?

  57. Bill Leonard says:

    Trotsky, I should be so wealthy!

    No, in fact I’m just an uncommon citizen (that is, a reasonably intelligent man who often finds himself surrounded by a bunch of damned fools) in California’s Santa Clara Valley. The last time I looked there were about 14 of us with the same name in the various local phone directories.

  58. http://www.lao.ca.gov/analysis_2007/general_govt/gen_12_1920_anl07.aspx

    In the middle of that document, figure 2 indicates the relative level of funding for some state in contrast to California, which apparently does have an agency comparable to the TRSGA. The data on New York, both state and city, looks interesting. Why do you suppose their funding rate is so much better than California despite the presence of influential unions?

  59. Wayne Martin says:

    > Why do you suppose their funding rate is
    > so much better than California despite the
    > presence of influential unions?

    I can’t speak for other states, but the answer for California is easy—the heavily Democrat-controlled Legislature has spent uncontrollably for every pet project that piqued their interest to the point that the state has found itself with a structural deficit which it does not seem to be able to get out of, even though the answer is as simple as stop spending.

    The Legislature has no clear checks-and-balances. The media at one time might have played that role, but no longer. In fact, just this last week there were articles in the SacBee about how California voters didn’t seem to care about the Governator’s plan to spend 10s of billions more of bond money on more of his pet projects.

    Public schools do not teach civics courses that deal with issues like public debt. Neither do colleges. If anyone learns about this sort of thing, it’s in a graduate school, or working in a City government.

    Even though the Unions are influential, it doesn’t mean they are very smart.

  60. I assume you mean by your last comment that the unions are willing to bankrupt the state and won’t be able to collect on what’s been promised?

    While I agree that it’s childish and short sighted to assume that you can negotiate more than the business or state can afford to pay and stay in business, I again go back to the idea that the unions can’t do it on their own.

    It doesn’t make more sense to me to blame the union more than the elected officials or the voters, and it still doesn’t seem appropriate to count on taxpayers simply walking away from the underfunded retirement system as a solution.

    Apparently, the Georgia Constitution doesn’t allow for the kind of abuse you see in California although the city of Atlanta would certainly try. When you are looking for a place to retire, maybe you should check us out.

  61. Wayne Martin says:

    > I assume you mean by your last comment that
    > the unions are willing to bankrupt the state and
    > won’t be able to collect on what’s been promised?

    More or less. For the past couple of decades the economy in California has been doubling roughly every decade and everyone believed that it was a never-ending party. People (including government) have been spending as if the party couldn’t end.

    While Prop.13 put a crimp in the spending for a short while, Government revenues continued to grow because Government simply invented be fees, fines and taxes. Rather than putting this money into infrastructure and reserves for the downstream payouts that government employees would be needing for their retirement .. the money was spent on “social programs”. Education has received a tremendous chunk of this money .. even though the return on this “investment” has been doubtful.

  62. Since you don’t have a reasonable expectation that it would have been used on infrastructure or reserved to actually meet previous obligations, education is probably as good a place as any to spend it; at least there’s some potential to do some good, as opposed to expanding the prison and welfare systems which will certainly be needed if the educational system fails (or continues to fail, depending on your perspective) systematically.

  63. Wayne Martin says:

    > education is probably as good a place as any to spend it

    It didn’t turn out that way. Califronia’s Upper University System does show the benefit of the investment, but the K-12 system does not.

    There are many variables that must be factored into this equation, to be fair to all parties. Unfortunately, the State Legislature failed to fulfill its obligations as “point man”. As a result, vast sums of public money have just disappeared (vis-a-vis “wealth redistribution”).

  64. Ragnarok says:

    “Since you don’t have a reasonable expectation that it would have been used on infrastructure or reserved to actually meet previous obligations, education is probably as good a place as any to spend it”

    Really? Your argument seems to boil down to the following:

    We don’t know that the money would have used for a worthy purpose, so it’s just as well that it was used on a proven failure.

    That’s actually a rather good display of fuzzy thinking.

  65. Is public education a proven failure?

    Wouldn’t you almost need to know things would be like without it to know that for sure?

    I’m sure education in California is wasteful and could be improved, but the state of California would probably be worse off without it.

    In terms of ways the gov.t of California could spend the money, I suspect it’s doing a lot more than you recognize.

    Heck, just keeping a great number of 14-18 year olds off the street each day is worth something.

    You’re assuming that what you’d get instead would be better which is pretty fuzzy as well.

  66. My two cents... says:

    This too is true…

    l am an inner city high school teacher of just over 25 years, at the top of my salary, and were I to retire now (age 55), my annual (net) benefit would be just about 25K. If I survive to the 30 year mark, when I can retire without penalty, my annual pension will jump to a net amount of approximately 35K. I will also receive a decent medical benefit (only $100 out-of-pocket monthly premium).

    While it is true that we only work 180 days a year, and our teaching day ends at 3pm. The amount of time spent after school preparing for my classes provides a truer picture of the average teacher’s workload. Let’s do the math:

    – I teach five classes, of about 30 students each, in one of our city’s “better” schools.
    Assuming most students do homework and come to school (which they do):

    – I must read/correct/record minimally 100 papers a night (including homework, labs, tests/quizzes), roughly but not unreasonably the average time spent/student each night is about 3 min. = 500 minutes (that’s well over 5 hours/night).

    – Add a minimal 3 hours/night prep time for three different courses taught, plus regular contact (phone calls or letters) to parents/step-parents/grandparents/aunts/group home, probation and parole officers, and other assorted custodians of my students. Needless to say this provides little time to eat and sleep. Indeed, the first three years teaching were the most challenging, but I did manage average a little over 3 hours of sleep each night (I caught up on weekends, and yes, it can be done.)

    Without going into all the gory details, over these many years the recognition and appreciation I have received for all this work has included too many bodily threats to remember, numerous assorted objects thrown at me, being spit at, cursed out, robbed on occasion, but breaking up fights on an almost weekly basis, and thrown down the stairs (ok, only happened once, but it was unnerving!). In case you are wondering, generally many, if not most of my students actually like me, and do show a modicum of respect.
    And yes, woe to the unpopular teachers!

    BTW, to earn the right to teach, I have paid for and endured roughly 20 years of my own higher education (Master’s degree plus 60 extra credits), and “Professional development” during the summer months to maintain my certification and proficiency in my field (science).

    Now, do we still wonder why there’s a national teacher shortage?

  67. My two cents... says:

    Oops, “My bad”, I more realistically corrected the minutes spent per night per student. Obviously, 3×300= 300 minutes. But honestly, I often spend more time reading and correcting individual student’s HW then they spent actually doing it!