Blue Model Blues
The Self-Sabotage of Teachers Unions

What is the biggest obstacle to giving teachers a raise? It’s not, as many Democrats and teachers’ unions suggest, Republican plutocrats looking to cut funding for schools and children. (Per-student spending on K-12 has risen steadily over the last two decades). The real challenge is one of the unions and their political allies’ own making: The debt accumulated by mismanaged public sector pension funds. From a new report issued by Bellwether Education Partners:

Today, states are paying an average of 12 percent of each teacher’s salary just for debt costs. If states didn’t face these large debts, they could afford to give that money back to teachers in the form of higher salaries—an average of $6,801 for every public school teacher in America.

The result is that most teachers are getting the worst of both worlds. Teachers are told they’re accepting lower base salaries in exchange for higher future retirement benefits, but because existing pension plans backload benefits to the end of a teacher’s career, that trade only works well for the small minority of teachers (about one in five) who remain teaching in the same retirement system for 25 or 30 years.

The findings represent a typical example of the way outdated blue model governance all-too-often hurts the people it was designed to protect. State legislatures have over-promised pension benefits, and politicized union-backed investment funds have mismanaged the money they do have. The result is that there aren’t enough funds set aside to cover the pensions guaranteed to retired teachers, so states need to dig deep into younger teachers’ pay to cover them. If pensions had been accounted for accurately and managed competently all along, teachers could be making an average of 15 percent more money today.

Meanwhile, teachers’ unions are resistant to any kind of reform that would change the way teachers save for retirement. This means that teachers’ wages will stay low (discouraging talented young people from entering the profession) to the benefit of those few veteran retired-teachers who can collect generous payouts—at least, until the whole Ponzi scheme goes bust.

Needless to say, the current system does not serve the public interest. States should start transitioning their public employees into defined-contribution, 401(k) style retirement accounts. After all, there is no reason teaching needs to be a lifetime career where educators endure low-salaries for decades, sticking it out so they can get a guaranteed retirement windfall. Switching to individual accounts would help put state budgets back on a path to solvency, raise starting salaries, attract more talented young people into the profession, encourage higher levels of teacher turnover, and ultimately improve outcomes for the people our education is supposed to serve: our children.

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