Earlier this summer, my AJC colleague James Salzer broke the news that Georgia expects to have to increase its payment into our Teachers Retirement System by as much as $400 million next year. That’s on top of a $233 million boost this year, which pushed the annual payment above $1.5 billion.
At $1.9 billion, the pension payment would represent about $1 of every $13 the state spends. That’s not one dollar out of every 13 spent on k-12 education, but out of the entire state budget: schools, colleges, health care, roads, bridges, troopers, prisons, all of it. But as you try to wrap your mind around those numbers, you can at least take comfort knowing all that money keeps teachers in the profession longer, to the benefit of students. Right?
Not necessarily. According to pension-system financial reports, the state expects just one of three new teachers to stick around as long as a decade, the time it takes to vest in the pension plan. Worse, four of five are expected to lose money on their pension deal because they won’t teach long enough to break even. Those sobering figures come from Bellwether Education Partners. The Washington, D.C.-based consultancy reviewed financials for all 50 states, plus the District of Columbia, and found Georgia isn’t alone.
“What we found is no state assumes teachers are responding to the state’s vesting period in order to qualify for a pension, which means either they don’t know about it or they don’t value it enough to change their behavior (and) for the states to change their financial models,” Chad Aldeman, a co-author of the Bellwether study, told me by phone recently. “Occasionally, people claim retirement plans are a recruitment and retention tool,” he added. “I think my takeaway is we shouldn’t think of retirement plans as a tool to manipulate the work force. I think we should (recognize) all workers need to plan for retirement, and we should shape plans with that in mind.”
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Most states have shorter vesting periods; five years is most common. Yet Georgia is right around the median when it comes to the percentage of new teachers expected to break even. In fact, on average, states with shorter vesting periods expect just 23.4 percent of their teachers to break even, barely above Georgia’s 20 percent. Georgia’s also in the middle as far as teachers expected to reach the normal retirement age, even though just one in six is expected to do so.
If pensions aren’t a great deal for teachers, why do education advocates guard them so fiercely when 401(k)-style alternatives are proposed? Maybe it’s because pensions were a better deal for past generations. (Gov. Nathan Deal’s Education Reform Commission reported the 10-year survival rate for teachers who began in 2005 was somewhat higher, at 44 percent, though that still implies well over half of that cohort will never break even.)
Maybe it’s because teacher advocacy groups tend to reflect the views of those who are lifers, and therefore more likely to see a benefit from pensions. Maybe the pension system’s forecast is wrong (it happens). Maybe it’s because we don’t see, and thus can’t quantify or hear from, the people who never get into teaching in the first place because they aren’t attracted to the traditional bargain of lower salaries but generous, guaranteed retirement pay.
In any case, taxpayers may soon have 1.9 billion reasons to ask whether pensions still make sense. And teachers — all of them, not just the lifers — have every reason to make sure we get the answer right.
Wingfield writes for The Atlanta Journal-Constitution. Reach him and read more at www.bit.ly/KyleWingfield.