Does Underfunding Pensions “Help the Kids”?
A letter I recently submitted to the Allentown Morning Call on state education subsidies and pension funding:
The Morning Call’s article on state subsidies to school districts has a curious headline “Corbett’s education spending hike covers pensions, not books.” Surely the authors realize almost no education spending goes towards books.
According to the Pennsylvania Department of Education, in 2009-10, only 4 percent of public school spending went for supplies. More than 60 percent was for employees’ wages and benefits, and 11 percent for debt payments.
It is surprising to see the Morning Call question whether pension payments, but not other school spending, are “for the kids.” Pensions are nothing more than deferred compensation for teachers and other school employees.
For years, unfunded pension liabilities have grown as lawmakers chose to underfund these plans. As the article notes, taxpayer contributions to pensions will increase dramatically not only this year, but every year in the foreseeable future. This growth will certainly crowd out other areas of school spending, if not bankrupt the state and lead to massive tax hikes.
What the article curiously fails to note is the Pennsylvania State Education Association – now complaining about the impact of pension costs – was complicit in the crisis. The PSEA lobbied not only for the 2001 pension increase, but also for 2003 and 2010 legislation to delay pension payments. Along with investment losses, this led to unfunded pension liabilities of $40 billion. The bill, with interest, is now coming due.
It is easy to see why the PSEA didn’t mind the underfunding, since it freed up funds to hire more staff, resulting in additional union dues. But educators should be aware that union bosses helped create a pension crisis that threatens teachers, taxpayers and students for generations to come.