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“Fix Pensions and We Won’t Have to Fire Teachers”

Posted by Larry Doyle on May 9, 2011 9:36 AM |

You do not need to read Sense on Cents to know that many of the states in our union are drowning amidst a sea of future pension obligations. While state treasurers and legislators are all too often inclined to play financial games and utilize smoke and mirrors to disguise the burden of these pension obligations, the absolute figures are so astronomical and will require a meaningful restructuring. Might that happen? Would public employees actually swallow a very real revaluation of their pension benefits?

Marcia Fritz, the head of the California Foundation for Fiscal Responsibility, is calling for her state to do just that. Ms. Fritz recently released a statement entitled, Fix Pensions and We Won’t Have to Fire Teachers,

California taxpayers would save billions of dollars that would flow to public schools, community colleges and universities if state and local public employees retired with benefits comparable to those provided to employees of Silicon Valley’s top companies. Teachers’ jobs would be saved and school programs spared.

California Foundation for Fiscal Responsibility will release a study soon that shows California’s largest and best companies typically spend one-third what the state spends on employee retirement benefits. If California spent the same percentage on retirement benefits as large private employers, taxpayers would save nearly $3 billion this year alone, enough to pay the salaries of 40,000 teachers. The savings achieved by school districts and local governments are an added bonus.

Teachers’ retirement benefits aren’t the problem. Our report shows that teachers contribute more of their salaries and collect less in benefits than other public employees. Prison guards, for example, retire seven years earlier than teachers with benefits that are 77 percent higher. Since teachers aren’t covered by Social Security, their lifetime retirement income is about the same as retirees from large Silicon Valley companies who participate in their employers’ 401(k) plans, earn similar annual wages and retire at the same age.

The problem that teachers and taxpayers must resolve is the lack of a sustainable funding mechanism for CalSTRS, the teachers’ retirement system, which carries $56 billion in unfunded liabilities — $127,000 for each of CalSTRS’ 440,000 members. Pension reform will give teachers better benefits than they have now and deliver them through a system that isn’t run by the bankruptcy courts.

Thousands of California’s most creative and energetic teachers have received layoff notices. School programs are on the chopping block. Taxpayers are asked to pay more to keep schools and other government programs running. If you think the pension crisis is someone else’s problem, think again:

1.  San Francisco city retirees received a cost-of-living increase this year while 400 teachers received layoff notices. The $170 million cost of the COLA would pay the salaries of those teachers for the next five years.

2. The University of California raised tuition again this year, and retirement benefits are partly to blame. More tuition hikes are proposed, but UC hasn’t changed its retirement plan, which pays 1,643 retirees $100,000 to $270,000 in annual pensions, including 224 who collect full-time paychecks on top of their pension checks. UC recently ended a 19-year “holiday” when UC employees paid nothing toward their retirement benefits.

3. The Los Angeles Unified School District, which has a graduation rate of 55 percent, sent layoff notices to 7,000 teachers last month. More than 600 retired administrators collect annual pensions that exceed $100,000 plus lifetime health care benefits.

4. Pension reform doesn’t mean retirees must give their benefits back. Public employees won’t lose the benefits they’ve earned. But reform is urgently needed to reverse the trend that consumes bigger chunks of revenue every year. Reasonable benefits and larger contributions from public employees will give California and local governments added resources to pay down pension debt.

5. We hope technology companies will work with us to inform parents, teachers and policymakers that there are alternatives to teacher layoffs and program cuts. An informed electorate will demand pension reform and insist that it be done right. A state constitutional amendment, aligning public retirement benefits with those offered by the federal government and California’s largest private employers, would solve both the state and local pension crises.

Silicon Valley has helped before when California’s public schools needed it. Your leadership is needed again.

What is needed to create a groundswell of momentum in terms of restructuring the political payoffs disguised as pension benefits? Transparency and a grassroots initiative. I commend Ms. Fritz and her colleagues at the CFFR for taking on this issue and highlighting the deeply embedded problems for which we all pay.

Ms. Fritz and the CFFR display a real appreciation for the core principles of ‘sense on cents’ which our entire nation needs to embrace.

Spread the word!!!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.




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