Education Funding

A Hard Line on Public Workers’ Pensions from Congressional Republicans

By Sean Cavanagh — December 27, 2010 4 min read
  • Save to favorites
  • Print

States face an estimated $1 trillion in unfunded retirement and health care bills for teachers and other public employees, according to one recent estimate. Now a California congressman has proposed legislation meant to shed light on how big the tabs are for state and local retirement plans, using the power of the federal purse to compel that transparency.

U.S. Rep. Devin Nunes, a Republican, has introduced the Public Employee Pension Transparency Act this month, with a number of GOP co-sponsors.

The measure would require the sponsors of those plans to publicly disclose information on the liabilities of those systems and their future costs. It would also prevent certain federal tax benefits on bonds from going to state and local governments that don’t comply.

The lack of openness about pension obligations “poses a direct and serious threat to the financial stability of such plans and their sponsoring governments, impairs the ability of state and local government taxpayers and officials to understand the financial obligations of their government, and reduces the likelihood that state and local government processes will be effective in assuring the prudent management of their plans,” the legislation asserts.

Nunes says he is protecting taxpayers—at the federal level—from having to pay the bill for pensions that he suggests are quite generous.

“As we speak, lucrative pension promises are being made to public employees that taxpayers simply cannot afford,” Nunes said in a statement. “The plans themselves admit to more than a $1 trillion in unfunded liabilities. Unfortunately, the true level of unfunded liabilities associated with these plans—perhaps more than $3 trillion—is being hidden thanks to unrealistic accounting standards.”

The $3 trillion estimate is apparently from a study by researchers at the University of Rochester and Northwestern University’s Kellogg School of Management, which use different methods than other, smaller calculations of those costs. Local governments carry an additional $574 billion in unfunded pension burdens, those researchers have said.

Elected officials across the country, particularly conservatives, have voiced concerns about the costs of state and local pension systems. To date, most of the attention has come from state-level politicians, like New Jersey Gov. Chris Christie, who argue that public workers’ retirement packages are far too expensive and out of line with what the private-sector provides. (The fact that unions have fought hard to obtain and protect those benefits probably makes them an especially appealing target for conservatives, given that organized labor traditionally aligns with Democrats.) The newfound interest among Congressional Republicans in the public pension issue suggests the issue has a political life beyond state capitals.

One of the suggested strategies for reducing the costs of state-run pension systems is switching them from a defined-benefit model, in which employers guarantee a specified benefit, to a defined-contribution, or 401(k)-style approach, which are more common in the private sector and give workers a return based on the gains or losses in the market. The defined-benefit model, at least as it exists today, is a boon to public employees but a heavy weight on taxpayers, argue conservatives like columnist George Will, who recently penned an opinion piece praising Nunes’ legislation.

Current pension enrollees’ benefits generally have a lot of legal protections, so as an alternative, state officials have sought to cut the benefits of future public workers. But others say there are cost-saving strategies that don’t involving moving workers to a 401(k). One suggested model is a cash-balance plan, often defined as a hybrid between defined benefits and defined contribution systems. Another option is simply adjusting defined-benefits plans to reduce state costs through steps such as lowering benefits or requiring workers to pay a bit more. That was the strategy used successfully by the state of Vermont in cutting the costs of its teacher retirement system, which saw both sides (the state and the union) give up something. I’m taking a more in-depth look at state retirement costs in our next issue of Quality Counts, an annual report which comes out next month.

Another factor to consider: Not every state is facing a huge crush of unfunded liability. States make regular contributions to fund their retirement systems, and some of them have done a lot better than others in keeping up with their obligations, as a recent report by the Pew Center on the States noted. Simply put, some states appear to be in a very tough spot, while other states appear to have paid the bills necessary to keep up with their financial commitments.

What’s the best strategy for states—or the federal government—to deal with the current and future costs of teachers’ and other workers’ retirement plans?

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

Commenting has been disabled on effective Sept. 8. Please visit our FAQ section for more details. To get in touch with us visit our contact page, follow us on social media, or submit a Letter to the Editor.


This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Teaching Webinar
6 Key Trends in Teaching and Learning
As we enter the third school year affected by the pandemic—and a return to the classroom for many—we come better prepared, but questions remain. How will the last year impact teaching and learning this school
Content provided by Instructure
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
School & District Management Webinar
Ensuring Continuity of Learning: How to Prepare for the Next Disruption
Across the country, K-12 schools and districts are, again, considering how to ensure effective continuity of learning in the face of emerging COVID variants, politicized debates, and more. Learn from Alexandria City Public Schools superintendent
Content provided by Class
Teaching Profession Live Online Discussion What Have We Learned From Teachers During the Pandemic?
University of California, Santa Cruz, researcher Lora Bartlett and her colleagues spent months studying how the pandemic affected classroom teachers. We will discuss the takeaways from her research not only for teachers, but also for

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Education Funding Reported Essay Are We Asking Schools to Do Too Much?
Schools are increasingly being saddled with new responsibilities. At what point do we decide they are being overwhelmed?
5 min read
Conceptual Illustration
Pep Montserrat for Education Week
Education Funding Interactive Look Up How Much COVID Relief Aid Your School District is Getting
The federal government gave schools more than $190 billion to help them recover from the pandemic. But the money was not distributed evenly.
2 min read
Education Funding Explainer Everything You Need to Know About Schools and COVID Relief Funds
How much did your district get in pandemic emergency aid? When must the money be spent? Is there more on the way? EdWeek has the answers.
11 min read
090221 Stimulus Masks AP BS
Dezirae Espinoza wears a face mask while holding a tube of cleaning wipes as she waits to enter Garden Place Elementary School in Denver for the first day of in-class learning since the start of the pandemic.
David Zalubowski/AP
Education Funding Why Dems' $82 Billion Proposal for School Buildings Still Isn't Enough
Two new reports highlight the severe disrepair the nation's school infrastructure is in and the crushing district debt the lack of federal and state investment has caused.
4 min read
Founded 55 years ago, Foust Elementary received its latest update 12-25 years ago for their HVAC units. If the school receives funds from the Guilford County Schools bond allocation, they will expand classrooms from the back of the building.
Community members in Guilford, N.C. last week protested the lack of new funding to improve the district's crumbling school facilities.
Abby Gibbs/News & Record via AP