It's no secret that teacher pensions are in trouble. NCTQ has long argued that not only are they in incredibly shaky financial health, but that they are unfair to many teachers. Two new studies illustrate just how unfair they are, and that the problem is getting worse.
Pension systems are particularly unfair to urban and charter schools teachers, according to a new study from University of Missouri economists Cory Koedel, Shawn Ni, Michael Podgursky, and P. Brett Xiang. Comparing teachers in Kansas City and St. Louis to the rest of Missouri, the study shows that teachers in the state's highest-need districts are paying more toward their retirement and will ultimately get less because pension benefits are concentrated among the few teachers who remain in the plans long enough to collect full benefits. For example, the likelihood of a teacher staying in Kansas City until they reach 'peak wealth' is just 3 percent.
Kansas City and St. Louis--as well as other large urban districts that operate a pension plan separate from the state system--are also at a disadvantage because teachers moving between districts suffer a pension penalty, making it especially challenging for urban schools to recruit mid-career teachers or school leaders from other districts.
Charter schools are even worse off because although they theoretically have freedom over teachers' compensation, that isn't actually the case as they are forced into fixed retirement benefits in Missouri's urban districts. The number of teachers employed by charter schools in Missouri's urban areas is growing-- over 40 percent of Kansas City teachers now work at charters-- and yet have no representation on the districts' pension boards.
Podgursky makes his case for pension reform in a recent op-ed saying that "back-loaded benefits make such plans an exceptionally bad deal for the typical new teacher in a Kansas City charter or district school."
In the other new study, Bellwether's Chad Aldeman shows the big picture with pensions nationally and that inequities are in no way confined only to Missouri. While it has been well documented that defined benefit systems disadvantage many teachers who don't start and end their career in the same place and at specific points in time, Aldeman shows that teachers who reap the full benefits of these systems have become the exception and not the rule.
Many teachers will never meet their state's vesting requirements, and many states have instituted rules over the years to make it more difficult for teachers to earn pension benefits at all, as we laid out in our No One Benefits report. During the recession, 12 states lengthened their 'vesting periods,' which helps limit state funding obligations by reducing the number of teachers eligible for benefits, according to the report.
By comparing the pension withdrawal rates and vesting requirements by states, Aldeman estimates that on average, nearly 56 percent of new teachers will not stay long enough to earn a minimum pension.
These two papers are a stern rebuke to those still trying to argue that maintaining the status quo of our current pension system is in the best interest of all teachers.