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April 11, 2011

1) California Teacher Pensions: Not Reality. Actuariality. Normally I would poke my own eyes out rather than read something titled "Actuarial Valuation for the Defined Benefit Program," but the recent analysis of the California State Teachers' Retirement System (CalSTRS) by Milliman Inc. is worth examining for the simple math involved.

If you follow the pension crisis at all, the actuarial tables should be read in their entirety - Appendix C contains many relevant statistics about the working teacher and retired teacher population in the state - but a handful of numbers should suffice to warn of how serious this is.

The system is funded at 71 percent of obligations - down from 78 percent just a year ago. The current level of funding is approximately 19.3 percent of the average salary of teachers enrolled in CalSTRS (teachers themselves contribute up to 8 percent). The actuarial analysis concludes that under current practices and assumed returns, the fund will be depleted in about 30 years.

What it would take to save the fund and restore it to a level where it would cover 100 percent of its obligations is a total contribution rate of 33.5 percent of the average teacher salary over the next 30 years. Here are those figures illustrated graphically:

Where is the additional 14.2 percent per working employee to come from? It's hard to imagine California taxpayers agreeing to a 14.2 percent pay hike for current employees. Why would they vote to pay such an amount cover their future retirement?

Whatever is done, it must be done soon. The life of the teacher pension system still exceeds the number of years in the career of the average retired California teacher. The point of no return will be when teachers are hired, expecting a pension when they retire in 27 years, but are enrolled in a pension system with only 20 years of money left. I doubt they will console themselves with the knowledge the previous generation of teachers had such great payouts.

2) Last Week's Intercepts. EIA's blog, Intercepts, covered these topics from April 5-11:

CTA Declares "State of Emergency," Plans Occupation of State Capitol. Even though the Capitol has been CTA-occupied territory for years.

*  Ohio Education Association Plans $50 Member Assessment for Collective Bargaining Fight. So then, the regular dues are for what exactly?

Elementary. The Pennsylvania State Education Association knows nothing about Walter Ludwig and his anti-voucher campaign.

Like Clockwork, Itís Time for Another Charter School Unionization Story. The umpteenth return of "We Hate You, Come Join Us!"

California: Itís Not Like Where You Live. Many Americans worry that California's policies will spread across the country. In fact, what makes California California is that no one else would try any of this stuff.

3) Quote of the Week. "If you were headed into surgery, who would you want holding the scalpel: a veteran surgeon or a resident? If you opted for the experienced hand, National Education Association President Dennis Van Roekel asks why it should be different for teachers when it comes time for layoffs." - from reporter Dave Murray's story about a panel at the Education Writers Association conference last week. (April 9 Grand Rapids Press)

I highlight this analogy not because Van Roekel is wrong, but because he's right only by limiting our knowledge about the doctors' comparable performance. Given a choice, most patients would want the best surgeon, and wouldn't want that selection based on the provisions of the hospital's collective bargaining agreement.

   

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