Report Examines Big-City Teacher-Pension Woes

By Stephen Sawchuk — June 06, 2013 1 min read
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The financial health of three school districts facing significant teacher-pension liabilities varies greatly based on the choices lawmakers have made to deal with the debts, according to a newly released report from the Thomas B. Fordham Institute, a right-leaning think tank.

The study projects how the pension costs in the three districts—Philadelphia, Milwaukee, and Cleveland, Ohio—will fare financially through 2020. And the three scenarios are very different.

In Milwaukee, savings have been effected because of the controversial 2011 Act 10, which removed retiree health benefits from the scope of collective bargaining and required teachers pay half of their annual pension contribution; in Cleveland, legislative changes have raised employee contributions and reduced benefits, but those alterations will be felt primarily by new employees; and in Philadelphia, which is in big trouble because of uncertainties about whether the state will continue to help pay some of its share. Under a worst-case scenario, pensions could account for 13 percent of Philadelphia’s budget by 2020, the report says,

In all, the report estimates that per-pupil retirement costs will rise by just $64 in Milwaukee, actually fall by $107 in Cleveland, and will skyrocket by $752 to $1,923 in Philadelphia.

Fordham’s report comes just days after I filed a similar story on this very topic. In the St. Louis school district, I report, declines in student enrollment plus an increase in pension costs means that retirement benefits amount to 10 percent of the budget. The situation has hastened some of the district’s cost-cutting measures, and fights over whether and how to restructure pensions are looming.

In all, the report looks at the various tradeoffs that accompany changes to pensions, something I’ve written about in several other places. And states have made lots of changes recently, but as in Cleveland, politics have put a lot of that burden on new teachers.

Given Fordham’s ideological bent, it’s probably no surprise that the think tank is generally in favor of shifting towards “defined-benefit” or “hybrid” plans over traditional pensions.

The report was supported by the Joyce Foundation, which underwrites coverage of state teacher-quality policymaking in Education Week. (The newspaper maintains sole editorial control over underwritten content.)

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A version of this news article first appeared in the Teacher Beat blog.