A pension myth debunked

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As the funding status of teacher retirement systems in many states reaches crisis levels, pension reform is increasingly on legislative agendas. Yet moving from 'on the agenda' to actual reform is proving to be a slow go. The recent edition of our State Teacher Policy Yearbook found more states nibbling around the edges than taking a real bite at systemic reform.

A new Arnold Foundation paper from pension guru Bob Costrell sheds some much needed daylight on a bogeyman that may be contributing to state inaction: fear of the 'transition costs' associated with structural reform. There is a common belief that reforms, however necessary and beneficial in the long run, will raise costs in the short term.  It is not surprising that policymakers would find such increases unpalatable in the current economic climate.

But Costrell shows that this is an unnecessary worry. Nothing under Government Accounting Standards Board (GASB) rules requires the kinds of accelerated payments legislators (and system administrators) fear.

Costrell provides plenty of meat for pension wonks to sink their teeth into, including state examples, and a key takeaway for advocates: transition costs are a compelling, but not legitimate, argument for the status quo.

-Sandi Jacobs