Tag Archives: Teacher Pensions

3 Reasons Why Teacher Pensions Are Critical to School Funding Equity

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:

  1. 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.
  2. 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.
  3. 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.

NOLA, Hurricane Katrina, and Teacher Pensions (Part II)

Yesterday I wrote about how Hurricane Katrina illustrated a big risk to teachers–that they won’t stick around long enough to qualify for sufficient retirement savings from their state pension plan. I want to add two points to that:

1. Because pensions are so back-loaded, teachers only really benefit after they stay for a VERY long time, often 25 or 30 years. After the Orleans Parish School Board dismissed 7,500 employees in the wake of Hurricane Katrina, they significantly altered their teaching workforce. Today, almost no New Orleans teachers have 20 or more years of experience, meaning very few teachers are truly benefiting from the state pension system. The graph below comes from a new brief out of the Education Research Alliance for New Orleans. The red line represents the percentage of New Orleans teachers with more than 20 years of experience. It plummeted after Hurricane Katrina, and today only about 7-8 percent of New Orleans teachers have 20 or more years of experience.

NOLA Teacher Exp Levels_circle


Other than this small fraction of workers, New Orleans teachers are enrolled in a retirement system that won’t provide them sufficient retirement income.

2. Louisiana teachers are part of the 40 percent of American public school teachers who are NOT enrolled in Social Security. Not only are they losing out from their pension system, they also can’t count on Social Security to provide them income protection in their old age as nearly every other American worker does. We think they should be.