Tuesday, February 15, 2011

Attacking Teacher Pensions is Misguided and Stupid

The following is a repost from the San Diego Education Report Blog and highlights some important points about teacher pensions and the particular plight of CalSTRS, the California educators’ pension system.

It is important to recognize that educators are forbidden from collecting social security, which is guaranteed to all other workers as a cushion against poverty after retirement. If teacher pensions, like CalSTRS, are gutted or eliminated, educators will be forced to work until death or retire as paupers. Many teachers, including me, have put in many years at other jobs prior to teaching, paying into social security, but we will never be able to get any of our contributions back as a consequence of our commitment to teaching. While this would is a significant loss, it was balanced by the knowledge that our teacher pensions were secure.

Much of the growing public support for raiding teacher pensions comes from biased data that show bloated payouts to some retirees. However, it is not teachers who are receiving these bloated payouts, it is administrators, especially superintendents, some of whom receive pensions as high as $280,000, while teachers are lucky if they earn $40,000 per year after retirement. $280,000 for an individual is pretty damned cushy, but $40,000 per year is not, especially if you live in an expensive city like San Francisco or New York.

It is also important to recognize that workers pay a portion of their salaries into their pensions. To strip away their benefits retroactively, after having paid into the plans for years, is tantamount to stealing their wages. Likewise, when laws like those in California allow pension managers to invest employees’ contributions into risky stocks, it places the entire system at risk, not only jeopardizing employees’ benefits, but exacerbating state and district budget woes when a downturn causes pension assets to decline.

Clearly, Les Birdsall of San Diego is not interested in attracting the best and brightest to work as teachers in San Diego. Since teachers don't pay for, or receive, Social Security benefits, Mr. Birdsall seems to be asking if retired teachers should perhaps live in homeless shelters and collect food stamps. Why would the SDUT Watchdog print such a silly comment while at the same time failing to investigate costly shenanigans of insurance companies and lawyers at the San Diego County Office of Education? Has the Watchdog received any rabies shots? Is it mad?

Slaying the Mythical Tax-Fattened Hog regarding public sector pay.

Educator pensions report raised questions
“The average education pension in $40,663. Is this too high?“
By Maureen Magee
January 31, 2011

Underfunded public pensions have made big headlines in San Diego and elsewhere, igniting a debate over the cost of retirement packages that often pits taxpayer groups against public employees, with the public somewhere in the middle.

A recent report by The Watchdog on educator pensions contributed to the debate. Some readers wrote to raise questions and voice their views — from outrage over what they call excessive pensions to sympathy for public employees whose retirement packages they believe have been unfairly called into question.

Mary Jean Word, a retired San Diego teacher, objected to our report claiming the educator pension system, like other public funds, offers “high benefits with no clear way to pay them.” She said the broad brush was unfair to those on the lower end.

“Do not include administrators with teachers,” said Word, who retired with 25 years service credit in California and receives an annual pension of $24,000. “They do not teach 20 to 150 students a day.”

Public educators from counselors to superintendents pay into the California State Teachers Retirement System. The program does not classify them by position, however, so separate data analysis was not possible. Although the top pension for a retired San Diego County educator is $281,034, the average retired educator in the county takes home just over $40,000 annually.

Much of the response to our story centered around whether that is a high number. For perspective, recent U.S. Census Bureau estimates show the average person of retirement age receives about $19,000 from retirement, pension and/or Social Security benefits.
Teacher fund status

Jim Wirt of San Diego wanted to know more about the state of the teacher pension fund. “You could have at least mentioned that CalSTRS assets have fallen...”

The fund reported good news last month when it posted 12.7 percent investment returns for 2010, raising its portfolio to $146.4 billion. The fund peaked at $180 billion in 2007 and had fallen to $112 billion in early 2009.

Even so, the system is expected to go broke by 2045 unless contributions are increased by the state, school districts and California educators. Officials say the fund needs a 15 percent hike in employer contributions this year. Only the state Legislature has the authority to approve such an increase. Since the state faces a $20 billion budget deficit, many say it’s unlikely to happen this year.
Who’s to blame?

Marty McGee of La Jolla wants to know how California got into this mess. She wrote, “In order for your watchdog reports to lead to meaningful changes, the people need to know who did it.”

Some of the blame goes to California voters.

“A little-known ballot measure a quarter century ago, Proposition 21 in 1984, opened the door for much of the current controversy over California’s public employee pensions,” former Union-Tribune reporter and pension expert Ed Mendel wrote last year. The measure passed with 53 percent of the vote.

Before Proposition 21, pension funds had been required to put most of their money into bonds. The ballot measure allowed pension funds to shift most money to stocks and other riskier investments. Some have said that public pensions would be more manageable today if the funds had stuck with safer investments.

Other changes to CalSTRS have also contributed to the funding gap.

In an effort to address teacher shortages and convince veteran educators to put off retirement, CalSTRS benefits were sweetened about a decade ago under AB 1509, legislation sponsored by Mike Machado, D-Stockton.

To fund the added benefits, the legislation took a fourth of the money teachers had been contributing to their pensions and used it to seed the added benefit. The teachers no longer pay into the supplemental benefit fund, but they draw from it.
What about Social Security?

Tom Helmantoler, a retired Julian High School teacher, asks this: “What about Social Security? Why can’t someone who has qualified for Social Security in the private sector turn to teaching as a second career and keep the Social Security benefit they earned?”

More than two decades before the Social Security Act was signed, the Teachers’ Retirement Law took effect in California in 1913. Public educators decided to continue to opt out of Social Security in 1955 because CalSTRS offered better benefits. California teachers do not pay into Social Security while they pay into CalSTRS. But some have paid enough toward Social Security to qualify for the benefit from other jobs. Those retired educators see a significant reduction in Social Security benefits under a law designed to prevent double-dipping. Similarly, retired educators who qualify for Social Security as the spouse or widow/widower of a worker who was covered by Social Security also see a reduction in that benefit under the law.

Should taxpayers contribute anything?

Les Birdsall of San Diego asked broader, philosophical questions. “The story tells us the average education pension in $40,663. Is this too high? What would be a reasonable pension? Should there be any pension for retirees?”

Alicia Munnell, director of the Center for Retirement Research at Boston College, said governments must compete with private sector salaries and benefits or it will not attract a qualified work force. And that means offering a decent retirement.

“It’s very easy to say that public sector defined benefit programs are more generous than what most people get in the private sector,” she said. “But it’s really hard to say.”

No comments:

Post a Comment