Doing the Math on Teacher Pensions

Just do the
math and it is clear that things don’t add up for teacher pension policies.
NCTQ calculates that state teacher pension systems are a half trillion dollars
in debt for 2014. Across the states, an average of 70 cents of every dollar
contributed to state teacher pension systems goes to ever-increasing unfunded
pension liabilities – and not to teachers’ future retirement benefits.

Further, 38 states
continue to cling to defined benefit pension systems that have become
increasingly inflexible and unfair to teachers.

In our new
report, Doing the
Math on Teacher Pensions: How to Protect Teachers and Taxpayers, NCTQ provides report cards on teacher
pension policies for each of the 50 states and the District of Columbia. We
challenge the claims of pension boards and other defenders of the status quo
about the cost-effectiveness, fairness and flexibility of the traditional
teacher pension plan.

Overall,
states earned a C- grade for teacher pension policies. Alaska earned an A for providing teachers with a fully portable
retirement plan similar to a 401(k) as is commonplace in other professions.
Five other states—Florida, Michigan, Ohio, South Carolina and
Utah—offer teachers the option of a
defined contribution plan.  But offering
a defined contribution plan is not a prerequisite for a high grade.  South
Dakota earned a B+ for a defined benefit plan that provides portability and
flexibility, while maintaining a healthy funding level.

In fact, we
find that only nine states have well-funded teacher pension systems, and even
some of these may not be as well-funded as they appear. State efforts to
improve the fiscal health of their pension systems have generally been at
teachers’ expense. Since 2008, more than half of the states have increased the
amount teachers must contribute. To make matters worse, many states are also
making it harder for teachers to receive benefits. Nationwide, fewer than half
of teachers stay long enough in the state and districts where they teach to
become eligible for retirement benefits. And 15 states make teachers wait 10
years to vest into their pension systems, resulting in too many teachers being
cheated out of the opportunity to build an adequate retirement nest egg.

To learn more,
download the report, see your state’s report card, or search our dashboard.