A failing grade for teacher pensions

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PHOENIX – Public school teacher pensions remain in bad shape nationwide even after some recent positive developments, a reform advocacy group said Friday.

The stark assessment came in press call hosted by the Retirement Security Initiative, an group focused on the long-term sustainability of public sector retirement plans. The nation’s public sector teacher plans face some $500 billion of unfunded liabilities by a conservative estimate, the group said, and the problem is especially bad where states are dealing with flat or shrinking revenues.

“We continue to have this reluctance to change,” said Pete Constant, the RSI’s executive director. Both pension participants and state legislators have resisted dealing with the short-term pain of increasing contributions or cutting expenses to put a retirement system on a firmer footing, he said.

Former San Jose, Calif. mayor and current RSI chair Chuck Reed said that California, home to the nation’s largest teacher pension, is at least in the position of having additional revenues to work with due to recent tax increases.

“We’re coping with these dramatically increasing costs by having more money. Not enough, but it at least mitigates the impact,” Reed said. Other states, such as Kentucky and Connecticut, aren't so lucky and face a more grim reality. As those states push the costs down to the local level, it’s really going to squeeze those localities, Reed said.

Constant said there is reason to be optimistic that the nation’s teacher pensions can achieve sustainability.

“While it is a Herculean task, it is something that can be done,” he said, arguing that stakeholder education is the key. Both Michigan and Pennsylvania have passed sweeping pension reforms in recent months, Constant said.

“They’ve been able to get these reforms across the goal line because they’ve been able to get out there and really educate all the stakeholders,” he said. “In the last 18 months we have seen more meaningful pension reform than we have probably seen in the last eight years.”

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