The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2015, the most recent date for which an actuarial valuation is available, Missouri's pension system for teachers is 83.9 percent funded, an increase of 3.8 percentage points since NCTQ's last report. Its current pension debt exceeds $7,000 per pupil throughout the state. It also has an amortization period of 22.1 years. This means that if the plan earns its assumed rate of return and makes its full actuarially determined contribution payments, it would take the state 22.1 years to pay off its unfunded liabilities. Currently, the state's funding ratio and its amortization period meets conventional standards, and the state's system is financially sustainable according to these actuarial benchmarks.
In addition, Missouri commits excessive resources toward its teachers' retirement system. The current employer and employee contribution rates of 14.5 percent are too high. State statute dictates that both contribution rates combined may not increase by a total of more than 1 percent each year, even if actuarial requirements are higher.
Missouri law also prohibits any future increases in benefits above those that can be funded by a contribution rate of 10.5 percent, which would be a reasonable rate considering that local districts and teachers are not making additional contributions to Social Security.
Public School & Education Employee Retirement Systems of Missouri, Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015.
The state would be better off if its system was over 95 percent funded to allow more protection during financial downturns. However, Missouri should consider ways to improve its funding level without raising the contributions of school districts and teachers. In fact, the state should work to decrease employer contributions. Committing excessive resources to pension benefits can negatively affect teacher recruitment and retention and crowd out funding for other areas in education. Improving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
Missouri was helpful in providing information that enhanced this analysis.