Budget & Finance

Journal Explores Costs of Teacher Pensions, Retiree Health Care

By Sean Cavanagh — November 22, 2010 1 min read

Amid rising concerns about the costs that teacher retirement plans bring to states, a recent collection of journal articles provides a breakdown of some of the key financial questions facing policymakers, unions, and the public.

The recent issue of Education Finance and Policy, the journal of the American Education Finance Association, examines the costs of pension and retiree health care systems for states. In sum, those costs are steep: A report released last year by the Pew Center on the States estimated that states have a collective $1 trillion in unfunded liability for those retiree programs. The journal includes articles by scholars Michael Podgursky and Robert Costrell, who have written extensively about what they see as the back-loading of tension pensions, and the incentives they create to push effective teachers out of the profession, encourage other educators to simply hang on, and discourage mobility. (Not everyone agrees. For a different perspective, see this paper by the Economic Policy Instiute.) Other pieces include Robert Clark’s essay on teacher retiree health benefits, and Juliet Squire and Rick Hess weighing in on states’ tendency to make politically motivated changes to their plans, at their financial peril.

Teacher retirement benefits emerged as a big issue in this year’s elections, though not all of the candidates promising to make sweeping changes to those plans, such as by switching them from defined benefit to 401(k)s for new employees, were successful (See: Meg Whitman). Podgursky and others have argued that states can work out pension deals with unions that save taxpayers money and don’t necessarily involve switching to a 401(k), such as by moving to “cash balance” plans. Looking ahead, this issue is not going away, particularly since states facing budget crises are going to be looking for financial savings wherever they can find them.

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A version of this news article first appeared in the State EdWatch blog.