Public-employee compensation packages are unsustainable — as public school teachers are now finding out.
New Jersey taxpayers know all too well about the high cost of the array of generous defined-benefit pensions, employer-subsidized healthcare plans, job protections and degree- and seniority-based pay scales struck by states, districts and locals of the National Education Association and American Federation of Teachers. The Garden State’s Teachers’ Pension and Annuity Fund offers annual payouts that can be equal to as much as 72.7 percent of average annual compensation, even as taxpayers wrangle with how to pay down $43 billion in pension deficits and unfunded retiree healthcare benefits (as of the 2006-2007 fiscal year). This is partly why the average retired teacher in New Jersey collected $34,643.48 in the 2007-2008 fiscal year (the last year available), 59-percent more than their public-sector counterparts elsewhere.
So when new Gov. Chris Christie announced earlier this week that he would require teachers (and other public employees) to contribute a modest 1.5 percent of salary to cover healthcare benefits (most districts currently cover the costs), the state’s National Education Association affiliate immediately rallied its members in opposition. “We urge parents and all citizens of New Jersey to not let the politicians use the people we all rely upon to educate our students as the scapegoats for their own irresponsibility,” wrote New Jersey Education Association President Barbara Keshishian in an e-mail blast.
Yet the teachers union isn’t getting much sympathy from the Democrat-controlled legislature — which gave Christie’s predecessor, Jon Corzine, the authority to impose those contributions three years ago — or from anyone else. State Senate President Stephen Sweeney has already declared that Christie has his backing to “move ahead.” Meanwhile the anonymous author of local blog New Jersey Left Behind points out that there is “a growing sense among the public that the leaders at NJEA project a sense of entitlement ill-suited for these stripped-down times.”
A similar battle is starting to emerge across the Hudson River in New York City, where Mayor Michael Bloomberg and his schools czar, Joel Klein, are faced with a teacher’s pension fund that lost $9 billion of its portfolio last year alone. In Albany, the Empire State’s spendthrift leadership recently struck its own modest blow for frugality by increasing the retirement age and segmenting teachers into a new retirement tier under which their contributions increase from 3 percent of salary to 3.5 percent.
All of this points to the reality that the NEA and AFT find themselves increasingly on the defensive as taxpayers, actuaries, school reformers and even legislators agree that traditional teachers’ compensation packages are neither fiscally tenable nor effective in improving student learning.
CERTAINLY THE ATTENTION these days is on the battles between school reformers and teachers unions over President Barack Obama’s Race to the Top reform effort and his plans to reauthorize the No Child Left Behind Act. With the prospect of Democratic congressional losses, Obama must satisfy demands from Centrist Democrats to expand charter schools and improve teacher quality, and still placate the NEA and AFT, whose campaign war chests (and rank-and-file members) the Democrats so desperately need. Both sides are already deriding Obama for essentially ditching No Child’s Adequate Yearly Progress provisions — the accountability measures that have helped reveal the woeful performance of urban and suburban districts alike — and adding elements of Race to the Top into his No Child plan.
But an even-more fractious battle, this time over teachers compensation, is heating up at the state level as the economic recession continues into a fourth year. Although the Obama administration helped stave off some of the squabbling last year by devoting $70 billion in federal stimulus funds to keeping teachers and other civil servants on the payroll, those funds are petering out. States and school districts can no longer hold off inevitable conversations about laying-off teachers. Nor can they ignore heavy pension and healthcare deficits that are being aggravated by investment losses and the upcoming retirements of Baby Boomers, who make up 36 percent of all teachers. None of this is good news for teachers unions, which have succeeded in making teaching the best-compensated profession in the public sector.
Last month in Vermont — where taxpayers faced the possibility of a 43 percent increase in annual payments to keep the pension afloat — state officials increased the teacher retirement age from 62 to 65 despite the objections of the NEA affiliate there. Green Mountain State teachers will also have to pay out 5 percent a year in pension contributions, an increase over the 3.4 percent annual payment — and may pay out even more if Gov. James Douglas succeeds in forcing them to bear 20 percent of healthcare premiums — or what private-sector workers pay.
In Pennsylvania, the NEA affiliate is already fighting to stave off efforts by state and local officials to enact an array of proposed benefit cuts, increases in retirement ages, and hikes in contributions on the salaries of its 191,000 rank-and-file members. Keystone State taxpayers are bristling over having to shell out $4.2 billion by the 2012-2013 fiscal year just to keep the teachers’ pension fund afloat, a seven-fold increase over this year’s annual payment. These costs, along with the $9 billion in pension and retiree healthcare deficits, promise to be a major issue in this year’s gubernatorial elections.
Meanwhile the NEA’s Indiana affiliate has fallen under scrutiny after last year’s collapse of the multiemployer health insurance plan it ran on behalf of the state’s school districts (I describe the collapse in this month’s issue of Labor Watch). School districts are mulling lawsuits against the affiliate and the NEA itself (which took over its operations) to recover $23 million in surplus payments. The collapse of the plan, which covered 50,000 Hoosier state teachers, also brings attention to the state’s pension deficit (now at $10 billion and growing). It is also a reminder that in some districts, teachers receive healthcare free of charge, which in turn explains why Indiana is one of four states that spend at least twice the national average of 28 cents in benefits for each dollar devoted to teacher salaries.
THE TRADITIONAL SYSTEM of teacher compensation dates back to the women’s suffrage movement of the 1920s when states extended tenure — or near-lifetime job protections — to public school teachers in order to protect women of child-bearing age from unfair dismissals. Pensions came into the picture as part of the development of the emerging civil service sector and the development of old-age pensions. Starting in the 1960s, the packages became more lucrative as the AFT and the NEA, through their successful efforts to force school districts into collective bargaining and a series of crippling strikes in New York City and other districts, sweetened the pot for their rank-and-file.
Until recently, successful lobbying by teachers unions assured that teachers would be well compensated no matter their performance. Other protections were offered by state laws that complicated teacher dismissals, desultory human resources practices at the school district level, the lack of well-developed school data, and class-size reduction programs enacted in the 1980s and 1990s. Just two percent of newly minted teachers hired by the Los Angeles Unified School District were ever dismissed or not granted tenure.
But the emergence of value-added assessment, which allows for the measurement of student test-score growth (and, in turn, teacher performance) over time — along with the passage of No Child and other accountability measures — means states and districts now have tools to assess the quality of their teaching staffs. Research also shows that tenure and degree- and seniority-based pay scales have little effect on student learning; a teacher is no more successful in improving student achievement after 25 years of teaching than an instructor working for four years, according to a report by Dan Goldhaber and Michael Hansen of the Center for Reinventing Public Education.
Ultimately, it is the high costs that are forcing states and school districts to reconsider the bargains they have struck with teachers and the unions that represent them. By 2003-04, states spent $50 billion on teacher benefits, a near three-fold increase over the amount spent 16 years ago, according to the U.S. Department of Education. That number has likely grown even more thanks to Bush-era spending sprees. Although states were able to cover up the full tab through overly optimistic actuarial assumptions, the collapse of the financial markets (along with disclosure requirements enacted by the Government Accounting Standards Board) is forcing them to fess up to the debts.
The NEA and AFT will definitely oppose any cut-backs in the packages they have so zealously gained. But there are too many pressures for states to keep up the status quo.
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