Teachers Need Pension Reform Too

Pension reform is critical for teachers as well as taxpayers, according to a new report from PennCAN.

Among the key findings of this report is how pension costs have skyrocketed, consuming the vast majority of new revenues for public schools. The report notes, “From 2010–2015, pension costs increased by $1.8 billion (261 percent).”

As a result of these higher pension costs, despite increases in state funding and property taxes, schools have laid off teachers. “Statewide, from 2010–2015, the number of full-time school employees dropped from 158,000 to 147,000, a decrease of 6.9 percent,” PennCAN finds.

But besides just the cost (and unpredictability) of defined benefit pensions, the report shows how most teachers lose out in a traditional pension—where the benefits are back loaded.

The chart below (Figure 8 in the PennCAN report) shows that the vast majority of teachers will work in the public school system less than 25 years, but the pension benefits dramatically increase for teachers who work 35 years or more. 

In fact, PennCAN writes (emphasis in original), “Only .52 percent of PA teachers entering at age 25 are projected to remain in the system for 35 years.”

Legislation passed by the Senate yesterday will create retirement plans that are portable, and benefit teachers in today’s modern workforce.

While this legislation won’t reduce the enormous burden past pension costs have placed on school districts and taxpayers, it will help prevent a future pension crisis by reducing the ability to underfund retirement plans, and protect taxpayers from stock market risk.