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