Kansas’ teacher retirement plan is underfunded, obsolete

It used to be that the teaching corps was made up primarily of the brightest and best of women, who had few other job options available to them. The world has changed, and it’s time–past time–for our personnel policies to change with them. One such necessary change is to the retirement system.

The group Education Sector has a new report, “Reforming Teacher Pensions for a Changing Workforce” (PDF). It says that most states have several problems with their pension systems for teachers and other government employees:

First, they’re woefully underfunded, with long-term obligations exceeding expected revenue by $450 billion. (For perspective, that’s about 12 percent of the entire budget of the U.S. government, with its far-flung military bases and many domestic programs.)

Next, and most important for our purposes here, current retirement policies are bad for education. The current approach “features elements that compel teachers to stay on the job, regardless of burnout or a desire to pursue a new career, until they reach a certain career milestone, after which they retire immediately or else begin to lose out financially.”

There are a number of political and legal obstacles to achieving both financial solvency and a retirement policy that encourages excellence in education, the authors admit. They survey the various ways in which defined benefit, defined contribution, and cash balance plans affect teachers differently.

Today’s pension schemes are built around a profession that practitioners remain in for 20-30 years with an expectation that performance and value continue to improve over time. But gains in teacher effectiveness are heavily concentrated in the early years.[So there’s less need to keep teachers employed in the same job for decades on end.] And younger workers, including teachers, are much more likely to move between careers. Solutions to the pension problem should be designed with an eye toward how the profession will look in the future, not how it looked in the past

By the way, how is Kansas doing? Not very well.  A state with a “funded ratio” of 100 percent has all the money it needs to meet its long-term obligations. A state with a ratio of over 100 percent has more than it needs. Kansas? Its ratio of 59, second-worst in the country. Only Illinois does worse. Kansas’ unfunded liability (for state employees, not just teachers) is over $8 billion, or nearly $3,000 for every man, woman, and child in the state. Note that these numbers are based on data from 2008–before the economy turned south.

For a more detailed look at the financial health of KPERS, see this report (PDF) from a research center at KU.

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