Pension debt will ‘eat everything in its path’

California’s teacher “pension debt will eat everything in its path,” writes Chad Aldeman on Education Next.

California discovered a $2.4 billion budget surplus from what it projected in January, but that money won’t be going to any new, exciting program. It won’t support the state’s transition to new academic standards. It won’t be going to expand kindergarten or offer pre-k to 4-year-olds. Governor Jerry Brown has other plans. He wants the money to go toward paying down the state’s debt, especially the $74 billion unfunded liability from the state’s teacher pension plan (CalSTRS).

In order to pay off the full debt over 30 years, Brown’s plan calls for teachers to pay more, school districts to pay much more and the state to pay more. “By 2021, nearly 40 percent of California teachers’ total compensation will go toward paying down the pension plan’s liabilities.”

Yet, due to high mobility, only one in five young teachers will receive a full pension, according to a Bellwether analysis. Half won’t qualify for a minimal pension benefit.

Illinois’ early retirement incentives didn’t lower student achievement, even though experienced retirees were replaced by less-experienced or brand-new teachers, concludes another study in Education Next. The state’s two-year program seems to have raised test scores in reading with the strongest positive effects in “schools that serve a more disadvantaged student population.”

It’s possible less-effective, less-energetic teachers were the most likely to take advantage of the early retirement offer, researchers speculated.

The state’s two-year program saved school districts $550.5 million in salaries, but the state paid all of that and more in pensions. However, a well-designed program could save money for taxpayers too, researchers concluded.

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  1. California is in this mess, along with Illinois (100 BILLION in unfunded liabilities) due to promises made by politicians to unions to boost pension payouts without increasing contributions.

    Detroit’s pensioners learned that the hard way when a federal bankruptcy judge said that public pension holders would have to take a hit to their pensions, like any other creditor, despite an amendment in Michigan’s Constitution protecting pension benefits.

    I guess you can’t depend on taxpayers to bail you out of every mess, California and Illinois 🙂

  2. Richard Aubrey says:

    It’s illegal–as illegal as…hyperbole fails me–for private corporations to underfund pensions like this.
    I guess nobody who knew cared and those who were to benefit are frequently (generally?) from the class which is trained to think of tax money as never running out because taxtherich, the bastards.

  3. The United States today lies in actuarial ruin.

  4. Indeed it should but politics gets in the way.

    Merit-based compensation only rewards teachers who are good at their craft and who gives a damn about that? Nobody but parents and parents don’t matter other then as an excuse to protect lousy schools.

    That two-tiered system is just an indication that things aren’t going well for the unions. Such was the case for the UAW in 1990’s when they had a two-tiered system forced on them by the declining fortunes of the auto industry.

    New members/employees don’t vote in union elections with anywhere near the consistency of older members and are much more likely to depart so the smart play for the union leadership is to give to those older members by taking from the newer.