Rick: How can you close me up? On what grounds?
Louis: I am shocked, shocked, to find gambling going on in this establishment!
Emile: Your winnings, sir.
Louis: [Sotto voce, to Emile] Thank you. Thank you very much. [Shouting, to casino patrons] Everybody out!
— Casablanca
We’re all shocked, shocked, by the revelation that the State of NJ has committed securities fraud (according to the front page of the New York Times today) by underfunding public employee pensions. Actually, Casablanca tribute aside, there’s no Louis out there, just years of making promises to public employees that we can’t meet, and years of burdening taxpayers with unsustainable costs.
If you want a little less resignation and a little more bluster see In The Lobby, which charges, based on data from USA Today, that public employees, including teachers, are overcompensated.
For a more measured approach, look at a new report out from The Education Sector, “Better Benefits: Reforming Teacher Pensions for a Changing Work Force.” Co-written by Chad Aldeman and Andrew Rotherham, this smart and nuanced overview examines the impact of defined benefits plans vs. defined contributions plans, plus the way we backload pensions in traditional teacher benefits, thus encouraging teachers to stay in one state and one career for their lifetime. In fact, these incentive structures no longer match the profile of the teaching force.
Bad for teachers. Bad for kids. Contrary to the actual effectiveness of teachers:
[A]n additional year of teaching experience does not necessarily mean a teacher is more effective. Teaching effectiveness tends to increase rapidly in a teacher’s first few years on the job, only to level off after a few years. In other words, the first years of experience are far more valuable than later ones, and teachers with a few years of experience are indistinguishable, in terms of effectiveness in the classroom, from teachers with many more years on the job.
Some Jersey-specific details: We have the third largest unfunded pension liability: California tops the list at $59.5 billion, Illinois is next at $54.4 billion, and then NJ at $34.4 billion. Looking at the debt as a per capita obligation we come in 5th, with Hawaii, Connecticut, Alaska, and Rhode Island in front of us. According to Education Sector (which got its numbers from the Pew Center on the States), our per person state pension liability is $3,966.
Solutions? Honor current obligations, but move to either defined contribution or cash balance plans and phase out defined benefits plans.. Restructure incentive plans so that they reflect the changing nature of the teaching profession. Be honest about individual state debt. And, interestingly, link teacher retirement information to student achievement data. Talk about transparency.
