{"id":578389,"date":"2021-09-29T16:01:11","date_gmt":"2021-09-29T20:01:11","guid":{"rendered":"https:\/\/www.the74million.org\/?p=578389"},"modified":"2021-09-29T14:58:05","modified_gmt":"2021-09-29T18:58:05","slug":"new-report-gives-low-grades-to-most-teacher-retirement-systems","status":"publish","type":"post","link":"https:\/\/www.the74million.org\/new-report-gives-low-grades-to-most-teacher-retirement-systems\/","title":{"rendered":"New Report Gives Low Grades to Most Teacher Retirement Systems"},"content":{"rendered":"<p>If you\u2019re a mid-career teacher thinking about what to do when your career winds down \u2014 don\u2019t move.<\/p>\n<p>Seriously, don\u2019t relocate across state lines, K-12 finance experts warn. Along with changing careers, it\u2019s one of the easiest ways to lose out on your retirement savings. In all, only about one out of five teachers receive their full pensions, while roughly 50 percent don\u2019t remain in a single pension system long enough to qualify for minimum benefits at the end of their service.<\/p>\n<span class=\"cta_snippet\"><hr><p><em>Get stories like these delivered straight to your inbox. <\/em><a class=\"arrow\" href=\"https:\/\/www.the74million.org\/about\/newsletters\/?utm_source=website&utm_medium=article&utm_campaign=top&utm_id=newsletter\"><strong>Sign up for The 74 Newsletter<\/strong><\/a><\/p><hr><\/span>\n<p>Those dreary findings come from <a href=\"https:\/\/bellwethereducation.org\/publication\/retirement-systems-ranking\">a report<\/a> on teacher retirement systems released last month by Bellwether Education Partners, a nonprofit research and consulting group. Ranking each state retirement system on an A-F scale, the authors find that only a handful can claim to serve both teachers and taxpayers well: Twenty states received F grades, while none received an A.<\/p>\n<p>Andrew Rotherham, one of Bellwether\u2019s founders and a co-author of the paper, noted that a wide variety of states earned spots near the top and bottom of the list, with both Democratic- and Republican-leaning political environments scattered throughout. But across the board, he observed, the status quo in too many states punishes a wide swathe of educators.<\/p>\n<p>&#8220;One of the ways this system is sustainable is that it creates millions of small losers and a much smaller number of big winners,\u201d said Rotherham.<\/p>\n<aside class=\"inline_story shortcode simple\"><a href=\"https:\/\/www.the74million.org\/article\/new-england-teachers-get-rawest-retirement-deal-in-the-country-0-in-ma-will-ever-see-investment-returns\/\"><figure style=\"background-image: url(https:\/\/www.the74million.org\/wp-content\/uploads\/2017\/01\/1497467190_5830.jpg);\"><\/figure><div><span class=\"sans related_tag\">Related<\/span><h4 class=\"sans\">New England Teachers Get Rawest Retirement Deal in the Country; 0 in MA Will Ever See Investment Returns<\/h4><\/div><\/a><\/aside>\n<p>Chad Aldeman, a former Bellwether analyst who now serves as policy director of Georgetown University\u2019s <a href=\"https:\/\/edunomicslab.org\/\">Edunomics Lab<\/a>, said that there had been some \u201cslow movement\u201d in a few states to offer public employees more choice and portability in their retirement benefits, but that the intertwined issues of back-loaded pensions and colossal debts owed by states were generally going in the wrong direction.<\/p>\n<p>&#8220;I would say, in broad strokes, the financial problems keep getting worse,\u201d said Aldeman, who worked on a previous version of Bellwether\u2019s rankings and consulted on this publication. \u201cAnd the related problem about the way the benefits are structured \u2014 it&#8217;s moving in fits and starts, but it&#8217;s also getting worse.\u201d<\/p>\n<p>Bellwether\u2019s newest report evaluates states on a \u201ccomprehensive\u201d basis that rates how each system performs for four separate constituencies: short-term teachers (those who teach in the system for less than 10 years), medium-term teachers (those who remain within the system for 10 years but leave before retirement), long-term teachers (those who spend their entire careers in the system), and taxpayers within each state. Retirement systems in all 50 states and the District of Columbia were ranked in terms of their performance for each category, and they all received an overall score.<\/p>\n<p>Grades were determined through the use of 15 separate variables, including overall funding levels, the length of the vesting period, whether teachers in the state are eligible for Social Security, required teacher contribution rates, and investment returns averaged over 10 years.<\/p>\n<p>South Dakota earned the top score, 88.4 percent, while Tennessee and Washington were the only two other states to notch even B grades. Among the lowest-rated jurisdictions were a litany of red, blue, and purple enclaves: California, Texas, Pennsylvania, Georgia, Louisiana, the District of Columbia, and Massachusetts, and more than a dozen others.<\/p>\n<p>Those summative scores can conceal significant variation within systems, however. West Virginia, for instance, earns an overall grade of D, partly because it is one of the worst states in the country for short-term teachers (its 10-year vesting period means that huge numbers of educators won\u2019t stay in the job long enough to earn benefits). But it lands just outside the top ten systems for taxpayers because it participates in Social Security, nets fairly high investment returns, and makes relatively high state contributions.<\/p>\n<p>Among all four constituencies, short-term teachers clearly make out the worst, with 33 states and the District of Columbia earning F grades in the category. Of the rest, only five (South Dakota, Oregon, Washington, Florida, and Michigan) even rated a C or higher.<\/p>\n<p>Aldeman said that the policy moves that have contributed to that reality \u2014 lengthening vesting periods, slashing benefits for newer teachers, and raising teacher contributions \u2014 can sometimes improve a given state\u2019s budgetary picture, but they also tend to disadvantage younger employees and those who don\u2019t stay their whole careers.<\/p>\n<p>\u200b\u200b\u201dWhen states historically have seen a big-budget bill for pension obligations, they have tended to cut benefits for new workers,\u201d he said. \u201cThe cuts mean that newly hired workers have to stay longer to qualify for any benefit at all, have to contribute more of their own salary toward the benefits, and have to wait longer to retire and receive a lower benefit.\u201d<\/p>\n<p>Citing <a href=\"https:\/\/www.illinoispolicy.org\/nearly-40-cents-of-every-education-dollar-in-illinois-goes-to-pensions\/\">a recent report<\/a> from the right-leaning Illinois Policy Institute, which found that 39 percent of the education funding disbursed by Illinois for the coming school year will be used to pay down the state\u2019s huge debt obligations, Aldeman professed himself \u201camazed.\u201d<\/p>\n<p>&#8220;I mean, you can see the trend; it just keeps going up and up. At some point, will leaders say, &#8216;That&#8217;s enough, we need to do something else about this&#8217;?&#8221;<\/p>\n<h3>\u2018Life happens\u2019<\/h3>\n<p>Teachers in 36 states and the District of Columbia are enrolled in defined benefit pensions programs, through which they make regular contributions to their plan and receive guaranteed payments in retirement. Fourteen states have created \u201cdefined contribution\u201d systems, often resembling 401(k) plans, which tend to vest over a shorter period of time and offer greater portability across state lines.<\/p>\n<p>Rotherham argued that education policymakers should not focus exclusively on plan type in debates over how to improve their systems. Defined benefit packages \u2014 often caricatured as \u201cgold-plated\u201d vestiges of the mid-20th century, when many employees could expect to retire early with enviable financial security \u2014 are not necessarily financially irresponsible for states, he said, and alternative systems can sometimes fail the test of adequacy for the retirees who depend on them.<\/p>\n<p>\u201cThis debate has often become very reductionist, and it&#8217;s become a debate over what should be the form of the plan \u2014 is it defined benefit or defined contribution? \u2014 rather than which elements would make it good or bad,\u201d Rotherham said. \u201cAnd that&#8217;s what we need to be talking about because for the plan participants, it&#8217;s those elements that affect their lives, not these ideological debates between 401(k)s and pensions.&#8221;<\/p>\n<p>Whatever specific structure a state commits to, he said, leaders can no longer condition their retirement benefits on career-long tenures within a given system; any expectation that employees will stay in place for decades is \u201cnot a match for our labor market,\u201d Rotherham added.<\/p>\n<p>&#8220;If you know you&#8217;re going to teach in one place for 30 years, the pension plan works for you, and you should do that. The problem is that people decide they don&#8217;t like teaching. They get sick, they have to move, they fall in love with someone whose job requires relocation, they need to be a caregiver. Life happens, people make plans that don&#8217;t work out, so these structures have to have some flexibility.\u201d<\/p>\n<p><em>Disclosure: Andrew Rotherham is co-founder of Bellwether Education Partners and serves on the board of directors of <\/em><a href=\"https:\/\/www.the74million.org\/supporters\/\"><em>The 74<\/em><\/a><em>.<\/em><\/p>\n<aside class=\"inline_story shortcode simple\"><a href=\"https:\/\/www.the74million.org\/newsletter\/\"><figure style=\"background-image: url(https:\/\/www.the74million.org\/wp-content\/uploads\/2022\/05\/the74million_logo.png);\"><\/figure><div><span class=\"sans related_tag\">Related<\/span><h4 class=\"sans\">Sign up for The 74\u2019s newsletter<\/h4><\/div><\/a><\/aside>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re a mid-career teacher thinking about what to do when your career winds down \u2014 don\u2019t move. Seriously, don\u2019t relocate across state lines, K-12 finance experts warn. Along with changing careers, it\u2019s one of the easiest ways to lose out on your retirement savings. In all, only about one out of five teachers receive [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":578397,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"MSN_Categories":"","MSN_Publish_Option":false,"MSN_Is_Local_News":false,"MSN_Location":"","MSN_Has_Custom_Author":false,"MSN_Custom_Author":"","MSN_Has_Custom_Canonical_Url":false,"MSN_Custom_Canonical_Url":"","om_disable_all_campaigns":false},"categories":[190],"tags":[2042,2043,2044,1103,1291,1296,1562,1498,2045],"series":[904],"_links":{"self":[{"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/posts\/578389"}],"collection":[{"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/comments?post=578389"}],"version-history":[{"count":2,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/posts\/578389\/revisions"}],"predecessor-version":[{"id":578400,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/posts\/578389\/revisions\/578400"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/media\/578397"}],"wp:attachment":[{"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/media?parent=578389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/categories?post=578389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/tags?post=578389"},{"taxonomy":"series","embeddable":true,"href":"https:\/\/www.the74million.org\/wp-json\/wp\/v2\/series?post=578389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}