Part III: The Facts About Teacher Retirement and Pensions

This is the third in a series of blog posts called EduFacts: The SOS March in Context.

I’m not one who subscribes to the notion that there is, in general terms, a “war on teachers.” But without question there is, in some quarters, a concerted effort to restructure public employee pensions and benefits.

In many parts of the economy, the defined benefit pension plan has gone the way of the Three Martini Lunch. But in most parts of the public sector, defined benefit pensions have survived.

Until this year. A combination of state budget shortfalls and the election of governors and legislators with a distinct anti-tax bent have led a number of states to take steps to increase teachers’ contributions to their pensions, reduce their future pension amount, or both.

Certainly the most contentious budget fight was in Wisconsin (you might have heard about it). As a result of the Legislature’s actions, the average teacher will see a $4,000 or $5,000 loss in take home pay, partly due to increases in health care contributions. (Teachers in Wisconsin make an average of $51,000.)

But Wisconsin is hardly alone. The National Conference of State Legislatures has summarized all state changes to employee pension plans. States changed their retirement plans in a variety of ways.

As a former legislator, I know that the easiest political change to make is one that affects only future employees. This was the approach in Delaware, Hawaii, Maryland, Montana, and New Hampshire, all of whom increased required contribution levels for employees hired after a certain date. While this approach is politically palatable, it doesn’t produce near-term savings.

Some states increased the employee contribution to the state retirement plan, sometimes in conjunction with decreasing the employer contribution. (That’s a tougher political sell, but it does produce immediate cost savings for the state.) For example, in Colorado, state employees will  increase their member contribution rate from 8% to 10.5%. The matching employer contribution rate will decrease from 10.15 to 7.65 percent.

Finally, states are taking action to rein in future pension increases. In Kansas, employees will have the option of continuing their existing contribution rate of 6 percent if they were willing to forego future cost of living increases.

A recent Education Sector report laid out ways that states could link changes in benefits to attracting and keeping the best teachers. That kind of long-term thinking was mostly absent from state capitals this year. Most of the changes made to teacher pension plans seem to be designed only to reduce costs.