"But the Pension Fund Was Just Sitting There"
The Politics of Teacher Retirement Plans

For those who believe it is morally incumbent upon each generation to confront its challenges and not palm them off on the next generation, this has been a tough year and a tougher decade. From the Medicare drug benefit to the stimulus package, from bailing out Freddie and Fannie to auto industry "relief," elected officials have ladled out sweeteners and stopgap measures funded by trillions of borrowed dollars. The tendency to dress these measures up as "investments" is even more disheartening, as we burden our children with staggering liabilities and avoid the consequences of our own lax discipline.

There may be no place where this tension is as stark as when it comes to teacher benefits and pensions in K-12 schools. There, public officials make expensive promises to influential adult constituencies, saddling our kids with enormous new obligations that will do little to improve teaching and learning. Before the market meltdown last fall, state pension systems were already more than $730 billion in the red. Moreover, teacher pensions--with their industrial-era inflexibility, emphasis on time served, and lack of portability--are ill-designed for attracting and retaining talented teachers in today's labor market. The result is a system that increasingly funnels K-12 dollars toward generous benefits while impeding efforts to boost teacher quality. Typically, when discussed at all, pension reform is understood as a fiscal challenge.

In this paper, my colleague Juliet Squire and I argue that the two central challenges of pensionreform are political. Underfunding is a product of an organized, influential constituency (teachers and public employees) demanding benefits from state policymakers who can grant future benefits without making offsetting cuts or raising taxes. Though this dynamic can alter when fiscal distress becomes stark enough, even this thin silver lining doesn't offer much hope for pushing policymakers to revisit the anachronistic structure of the benefits. We suggest some institutional reforms that might help tame irresponsible behavior, but we are not optimistic.

Click here to read the full text as an Adobe Acrobat PDF.

Frederick M. Hess is a resident scholar and director of education policy studies at AEI. Juliet P. Squire is a research associate at AEI.

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