Money spent on public teacher pensions is often left out of analyses of school finance equity. Rather than a being seen as an issue affecting students’ education, pensions are often viewed as a budgetary dilemma for state legislators. Yet, both of these approaches overlook the effect pension spending can have on increasing the funding gap between schools based on students’ race.
Last week I released a new report, “Illinois’ Teacher Pension Plans Deepen School Funding Inequities,” that shows just how much pension spending in Illinois affects the state’s finance equity. The results are startling and reveal that teacher pensions are yet another example of how states and districts underinvest in the education of low-income students, and the educations of black and Hispanic students.
Here are three key reasons why teacher pensions should be thought of as a key part of the push to ensure educational equity:
- Class-based gaps grow by more than 200 percent after accounting for pension spending. Teacher salaries comprise the lion’s share (roughly 80 percent) of school expenditures. And, unfortunately, the most experienced and highest paid teachers are unevenly distributed across schools. In Illinois the salary gap between the schools serving the highest and lowest concentrations of low-income students is on average around $550 per pupil. After factoring in pensions, however, the disparity jumps to over $1,200 per student.
- Race-based gaps increase by more than 250 percent after accounting for pension spending. In Illinois, the average teacher salary-based gap is $375 between schools serving predominantly white students and those serving predominantly nonwhite students. But after accounting for money spent on teacher pensions, the inequity increases to nearly $950 per pupil.
- States are investing more money in their pensions (because they’re in significant debt), and that will widen the gaps even further. From an educational equity point of view, the Illinois pension system is the problem. Since pensions are paid as a percentage of teachers’ salaries, which are unevenly distributed across the state, funneling more money into the system may help to decrease unfunded liabilities, but it also will result in even larger funding disparities.
Illinois is widely considered to operate one of, if not the most, inequitable school finance systems in the country. Yet, many prior analyses underestimated the problem because they have not always included money spent on teacher pensions. This problem is not unique to Illinois. On the contrary, pensions will increase funding disparities in any state with an uneven distribution of teachers. The effect will likely be greater and more closely resemble Illinois in states, such as Missouri and New York, where large urban cities operate separate pension funds.
There are a couple of steps states can take to mitigate the increase in education funding disparities due to pension spending. Those states with more than one retirement system should consider folding the district plans into the state fund. The state has greater resources and almost always contributes to the pension fund at a higher rate. This would ensure that schools in the district — which disproportionately serve low-income students and students of color — receive pension payments at the same rate as other schools.
As it stands now, low-income students and students of color receive far less than their fair share in school funding. To change that, states must address the structure of their teacher pension systems as well as their school funding formulas. Teacher pensions are a key feature in the broader education equity debate.
From Randi Weingarten to Betsy DeVos, to Michelle Rhee and Kaya Henderson, some of the biggest names in education policy on both sides of the aisle are women. The majority of teachers (76 percent), too, identify as female. But new survey results from the American Association of School Administrators (AASA) show that about 77 percent of school superintendents identify as male. So while women make up the majority of the teacher workforce, they are vastly underrepresented in higher-paying leadership roles.
Today is International Women’s Day, and while these survey results show progress from previous years, there’s significant room to grow in closing the school leadership gender gap. This disparity reinforces gender wage gaps, and, as we’ve covered previously, this inequity of earnings follows female teachers into retirement.
It’s important to note that, while we can dig into these findings broadly, the AASA survey’s 15 percent response rate suggests it may not be fully representative. Additionally, while the federal government collects representative stats on teachers and principals, it does not do so on school district superintendents. Still, state-based work, like this October Houston Chronicle piece as well as a November Education Week article delve into these trends further, with similar findings.
Here are three takeaways on the state of female superintendents we can glean from the AASA’s 2016 survey: Continue reading
This post originally appeared on our sister site, TeacherPensions.org.
Should public charter schools be allowed to opt out of state-run teacher pension plans?
There are strong arguments in favor of letting charter schools opt out. Most charter school teachers would be better off in more portable retirement plans. And charter schools tend to be new, so it might be unfair to ask them to pay off the debts of the old system.
Still, if charters are allowed to opt out, that puts added pressure on traditional school district budgets as they’re forced to take on proportionately larger shares of state pension legacy costs. As the charter sector has grown over time, and as pension debts eat up a larger and larger share of school spending, the charter school pension question has been bubbling up. It’s even played a small role in the debate over the nomination of Betsy DeVos to serve as the U.S. Secretary of Education.
As my colleagues Bonnie O’Keefe, Kaitlin Pennington, and Sara Mead noted earlier this week in their slide deck analyzing the education landscape in Michigan, DeVos’ home state of Michigan has one of the nation’s largest charter sectors, with more than 40 charter school authorizers and 10 percent of its students attending charter schools. Michigan’s charter school sector is also unique in that 71 percent of its charters are run by an Education Management Organization (EMO), which is a for-profit operator of public schools.
Although DeVos has been personally maligned for Michigan’s large for-profit charter sector, one thing that’s been missing from the debate is that Michigan’s EMOs are exempt from the state teacher pension fund. That means Michigan’s EMOs get to avoid paying a share of the state’s pension legacy costs, and in the process, they’re playing a small part in exacerbating the pension debt problem for all other Michigan public schools.
How big of a problem is this? In order to separate fact from fiction, here are six things to know about charter schools and teacher pensions nationwide, with Michigan as an example: Continue reading
In two new briefs out today, I attempt to tackle the notion that a defined benefit “pension” is automatically a good retirement plan for teachers. Each brief takes one slice of the 3-million-strong teaching workforce to look at how current pension plans in all 50 states serve short- and medium-term workers, respectively:
- The first brief looks at the hidden penalties faced by short-term workers, those teachers who won’t stay long enough to qualify for any pension at all. For a variety of personal and professional reasons, about half of all new teachers fall into this group. They’ll leave without any real retirement savings, and they’ll forfeit thousands of dollars their employer contributed on their behalf.
- The second brief, co-authored with Richard W. Johnson, the Director of the Urban Institute’s Program on Retirement Policy, looks at the negative returns faced by medium- and longer-term teachers. Because of the back-loaded nature of pensions, teachers must stay a very long time in a single pension plan to qualify for a decent benefit. In the median state, teachers must serve 25 years (!) before qualifying for a pension worth more than their own contributions. Instead of benefiting from their pension plans, most teachers are net contributors.
It’s commonly accepted that public-sector workers such as teachers trade lower salaries for higher job security and more generous benefits. But that trade only works well for the small minority of teachers who actually stick around until retirement. Most teachers get the worst of both worlds—they earn lower salaries while they work and they lose out on retirement savings when they leave.
To learn more, read Hidden Penalties and Negative Returns.
Updated 9/2/2015, 2:50 p.m.: Members of our team have been reflecting on what Hurricane Katrina meant for students, teachers, and community members: