This is the third in a series of blog posts introducing Fordham's latest report, Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century.
The financial crisis brought increased urgency to solving the pension crunch, but few groups in K-12 public education have found relief. As Michael B.Lafferty notes in Halting a Runaway Train,
?while the market crash caused much hand-wringing, it has, to date, brought about little fundamental change in the public-pension sector. A number of states took action to increase contributions to their pension plans, raise the retirement age, and/or fiddle with benefit formulas, but these actions merely nibbled around the edges of a gigantic problem.
But while examples of organizations that manage teacher retirement benefits finding solutions are rare, they are real. In particular, Halting a Runaway Train looks to creative states and charter schools that have made meaningful, if sometimes rocky, transitions away from defined-benefit (DB) retirement plans.
The Last Frontier changes first. While states like Nebraska and Michigan have cut back on DB plans for most public workers, legislatures have proven hesitant to extend those limits to teachers. Alaska, however, made the unprecedented move of replacing its DB plan with a defined-contribution (DC) plan for all new hires in 2005. Recognizing a widening gap between funds promised and allocated, legislators moved quickly and pushed the change through before opposition could organize. Alaska illustrates the advantages of swift
This is the second in a series of blog posts introducing Fordham's latest report, Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century.
So where should leaders and policymakers go for examples of how to fix teacher pensions? And what exactly does successful pension reform look like? It turns out that some of the most instructive examples don't involve K-12 education at all, as author Michael B. Lafferty looks to the likes of IBM, the federal government, and the University of Missouri for answers.
The feds lead the way. While 80 percent of state and local workers participate in defined-benefit (DB) retirement plans, the largest government in America shifted away from the DB model a quarter century ago. During the Reagan years, the feds began enrolling all new hires in plans that combined the DB and defined-contribution (DC) models, while allowing existing employees to transfer as well. Not always known for its forward-thinking, the federal government actually offers an early blueprint for public-sector pension reform and a primer on making the most of a bleak fiscal situation to drive needed change.
IBM: Lessons from the business world. While DB pensions are the norm for teachers and most other public employees, they are increasingly endangered in the private sector?the proportion of American private-sector workers at medium and large firms with DB plans has shrunk from 80 percent in the
This is the first in a series of posts that will introduce the Fordham Institute's newest publication, Halting a Runaway Train: Reforming Teacher Pensions for the 21st Century. Today's entry outlines the seriousness of the teacher pension crisis; check back over the coming days for a peek at the examples and lessons the report provides.
Public employee pensions, like those enjoyed by the vast majority public school teachers, are intended as a form of individual financial security: compensation each employee earns through decades of service. Today, however, they represent a grave and deepening threat to the nation's economy.
In 2010, the Pew Center on the States found a $1 trillion gap between the retirement benefits states promised and the funds allocated to pay for them as of 2008. A year later, the financial crisis had pushed the tab up another 26 percent.
The effects of this liability are already popping up: when Standard & Poor dropped New Jersey's credit rating in February, the first explanation given was ?concern regarding the stresses from the state's poorly funded pension system.? Such fallout can only be expected to spread, with Pew reporting that pension funds in 31 states were funded below 80 percent in 2009.
How did the situation get so grim? While the financial crisis and irresponsible politicians played their parts, the defined-benefit (DB) models dominant in the
Thank goodness for Fordham's Peter Meyer, a master at turning policy gibberish into plain English. But can it possibly be true, as reported in his recent post, that the Regents and the New York State Department of Education went to court with the teachers union over whether test scores would count as 20 percent or 40 percent of a teacher's annual evaluation? And, after losing, that they are planning to use additional public funds to appeal?
Set aside the fact that New York's evaluation law (passed to prime the Race to the Top pump) clearly set the ratio at 20 percent. There's a larger point: WHO CARES?
We are at the very beginning stages of teacher evaluation reform. For the first time in history, states and school districts are aiming to take the evaluation of teachers seriously. But when it comes down to the details, we've got little more than educated guesses about what might work best. Yes, tying 40 percent of an evaluation to test scores might make it easier to dump a teacher who gets terrible results. But it might also create unhealthy pressure for ALL teachers in the state to teach narrowly to the test. Maybe 20 percent would strike a better balance--and still allow administrators to move bad teachers out of the classroom. We really don't know.
So to the Regents and the NY state department of ed I say this: Your newfangled evaluation system is going
About the Editor
Michael J. Petrilli
Executive Vice President
Mike Petrilli is one of the nation's foremost education analysts. As executive vice president of the Thomas B. Fordham Institute, he oversees the organization's research projects and publications and contributes to the Flypaper blog and weekly Education Gadfly newsletter.
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