I will protect your pensions. Nothing about your pension is going to change when I am governor. - Chris Christie, "An Open Letter to the Teachers of NJ" October, 2009

Tuesday, August 20, 2013

Teacher Pensions: The Stupid Keeps On Comin'

Make it stop! MAKE IT STOP!!!
As the Philadelphia School District scrambles to come up with enough cash to open for students in September, a new report suggests the city’s school funding crisis is on par with municipal issues in Detroit, Chicago and elsewhere. 
At the heart of it all: pensions. 
Payments to retired teachers and public employees are a growing threat to government budgets everywhere, and it is no different in Philadelphia. A new report from the Thomas Fordham Institute, a conservative education nonprofit, estimates the district’s total retirement costs will balloon from $73 million in 2011 to $349 million by 2020. On a per-pupil basis, that works out to $900 per pupil in the district for 2011, growing to $2,300 per pupil by 2020. [emphasis mine]
This is like the perfect reformy storm: the Philadelphia Inquirer, which, under their new owner, George Norcross, must always find a way to blame teachers for school funding woes, even when it's not their fault; Fordham, the font of all reformimess; and the Franklin Center, one of the top propaganda outfits funded by the rabidly right-wing Koch brothers. You couldn't find a trio with better anti-union, anti-teacher bona fides anywhere on the planet.

Let's start by making something crystal clear: the fiscal problems of the Philadelphia schools were created because Pennsylvania has one of the least fair school funding systems in the nation. I imagine the rest of Fordham's staff is afraid to look at Bruce Baker's posts on this (seeing as how Baker smacks around Andy Smarick so badly that the wonk must be lying on the floor in the fetal position). But they and this op-ed's writer, Eric Boehm, had best get themselves up to speed:
For the past few decades, Philly public schools have been systematically financial deprived as a function of one the nation’s most inequitable state school finance systems. To review:
  1. Pennsylvania has among the least equitable state school finance systems in the country, and Philly bears the brunt of that system.
  2. Pennsylvania’s school finance system is actually designed in ways that divert needed funding away from higher need districts like Philadelphia.
  3. And Pennsylvania’s school finance system has created numerous perverse incentives regarding charter school funding, also to Philly’s disadvantage. (see here also)
The Philly area remains among the most racially and economically segregated areas in the nation.
Let's me add a few more relevant facts:
In terms of salaries, Philadelphia teachers, on average, earn 15 to 20 percent less than teachers in surrounding counties. (Although starting salaries are comparable, salaries for experienced teachers top out at a much lower level.) If the salary reductions being proposed are put into effect, then Philadelphia teachers' pay will be even less competitive with their suburban counterparts.
Then consider that working conditions in Philadelphia schools are more difficult than those in the suburbs. Class size is larger; there are fewer books, materials, and supplies; computer access is scarcer; instructional, social, and health supports are insufficient. And these working conditions will be significantly worse if other proposed reductions go into effect, including the elimination of counselors, nurses, assistant principals, and sports programs. [emphasis mine]
So Pennsylvania has a school funding system designed to screw cities like Philadelphia. And Philly has seen its revenues drained from the public school system by rampant, unjustified privatization. Which has forced the city to pay its teachers less than the surrounding suburbs, even though teaching in Philly is more challenging.

Here's one of the ironies in all this: Fordham is the progenitor of the National Council on Teacher Quality, which states that it exists to advocate "... for reforms in a broad range of teacher policies at the federal, state and local levels in order to increase the number of effective teachers." How will slashing the compensation for Philadelphia's teachers relative to surrounding districts help "increase the number of effective teachers" in the city?

It's always amused me to watch "conservative" organizations like Fordham and Franklin and NCTQ twist themselves into incoherent knots over labor market effects when it comes to teachers. These stalwart defenders of free-market principles when it comes to school "choice" never care to acknowledge that maybe the free market comes into play when addressing teacher quality. They pretend that districts can simply cut compensation and gut workplace protections and make teaching less attractive (by, among other things, increasing class size and tying compensation to testing) and fire "bad" teachers... and yet, still, crowds of highly-qualified, well-trained, better-performing candidates will still magically line up to take jobs teaching in America's most benighted cities!

What are these people smoking? Do they really think that Economics 101 does not apply to the teacher labor supply? That the evil unions have so distorted the market that poor urban schools will attract better teachers when they renege on their pension promises?

I actually don't think they believe this fairy tale at all -- and you can find evidence in the language used in a report like Fordham's The Big Squeeze: Retirement Costs And School District Budgets. In the report, pensions aren't cut; they're "reformed." Pensions aren't compensation; they're "promises." Slashing pension payouts and retiree health care isn't reneging; it's "flexibility." This is an Orwellian warping of language in an attempt to deny the truth:

Pensions are not really "benefits"; they are deferred compensation. And they can actually save the taxpayers money if they are managed correctly. I've quoted David Cay Johnston on this many times before:
The fact is that all of the money going into these plans belongs to the workers because it is part of the compensation of the state workers. The fact is that the state workers negotiate their total compensation, which they then divvy up between cash wages, paid vacations, health insurance and, yes, pensions. Since the Wisconsin government workers collectively bargained for their compensation, all of the compensation they have bargained for is part of their pay and thus only the workers contribute to the pension plan. This is an indisputable fact. 
Not every news report gets it wrong, but the narrative of the journalistic herd has now been set and is slowly hardening into a concrete falsehood that will distort public understanding of the issue for years to come unless journalists en masse correct their mistakes. From the Associated Press and The New York Times to Wisconsin's biggest newspaper, and every broadcast report I have heard, reporters again and again and again have written as fact what is nonsense. 
Compared to tax, this economic issue that reporters have been mishandling is simple. But if journalists cannot grasp the economics of this issue, then how can we hope to have an intelligent debate about tax policy?  [emphasis mine]
So you can't "reform" pensions without cutting teacher compensation, and you can't cut that compensation without affecting the teacher labor market. But Fordham and Franklin and all the other reformy right groups out there don't want to make this connection. Want to know why?

This is from the good folks at the Institute for Taxation and Economic Policy. In addition to having one of the least-fair school financing systems, Pennsylvania also has extremely regressive taxes.

I can't say for sure that raising taxes on the wealthy would completely solve the underfunding problem -- but it sure would help. Of course, making the funding problem out to be insurmountable is what the reformy right is paid to do: that way, they can make the argument that raising taxes on the wealthy just won't matter very much, because we are in such a big hole.

However, as both Paul Krugman and Dean Baker have argued, the pension crisis is manageable, if state and local governments start making their contributions (something they have required from teachers, by the way -- our mandatory contributions are the only thing keeping the system afloat). At least some of the money is there; all the governments have to do is start collecting taxes from the wealthy at a rate equivalent to what they collect from the poor.

But this, of course, will never be allowed. The end game here has always been to defund and eventually destroy the public education system. If neglecting pension obligations helps move school systems toward collapse and screws unionized workers out of the compensation they earned...

Well, that's a twofer!

Tom says: "Screw union retirees AND destroy Philly's schools? What a deal!"

ADDING: Am I the only one who thinks it is more than a little deceptive to state pension liabilities in terms of past, current, and future "costs per pupil"? Today's pension costs aren't only for current pupils: they are for every previous pupil who was taught in the system by a retired teacher. I understand paying off the liabilities comes from the current budget, but this reflects a generational shift: if the bill had been paid previously, costs wouldn't be rising as fast.

In other words: that growth to a high cost in the future wouldn't be nearly as great if the district and the state paid in more money now. So making a comparison between past, present, and future costs per pupil is not particularly germane to the discussion.

I'm no expert on this stuff, so someone please tell me what I'm missing here.

About 40,000 public school teachers are supplementing their salaries with a night gig likely too scandalous for your average PTA. The job title? Sugar baby.
That's according to dating site SeekingArrangement.com, the go-to Internet marketplace for "mutually-beneficial relationships" almost exclusively between older men and younger women. The site's "successful and generous" sugar daddies provide pre-determined allowances to "attractive, ambitious and goal oriented" sugar babies, in exchange for their young, nubile companionship.
The website recently announced it noticed an "influx of teachers signing up last month, prior to heading back to school."
The top school district where teachers are seeking out the sugar baby night shift? Philadelphia. (Incidentally, that school district announced 646 teacher layoffs this past June alone, according to the New York Times. Now, the district is pushing its teachers' union to accept $133 million dollars in cuts.)
Along with Philadelphia, other popular school districts for teacher/sugar babies include Miami-Dade, Los Angeles and New York.[emphasis mine]
Talk about a "defined contribution"...


giuseppe said...

These mostly libertarian billionaires are determined to turn teachers into de-unionized at will employees with few or no benefits and no pensions. They want to eliminate defined benefit pensions and replace them with crappy defined contribution pensions, bogus 401(k)s or nothing because workers in the private sector don't have pensions so why should those uppity teachers. But wait there's more, the corporate elites (like Pete Peterson, the Koch brothers and the rest of these libertarian robber barons) want to eliminate Social Security, too.

giuseppe said...

David Cay Johnston makes the point that public sector defined benefit pensions are not some kind of gift but that they are fully paid for by the public workers in the form of deferred compensation. NJ teachers have paid billions into the pension fund over the decades, their pension is not some gift, the teachers pay for this benefit, it's taken out of each and every paycheck. Christie Todd Whitman borrowed from the pension fund to give tax breaks to the rich and sadly most of the governors, D or R, put little to nothing into the pension fund and that is the source of the problem, not teacher greed or a supposedly too rich pension. So now the teachers will have to pay the price for the nonfeasance of the politicians.