Author: Leslie Kan

*Cross posted from Teacherpensions.org’s blog.

New Jersey Governor Chris Christie certainly doesn’t beat around the bush. In an interview with Jake Tapper, New Jersey Governor said he prefers to deal with bullies with a “punch in the face.” Who deserves this? The teachers’ unions, according to Christie.

While this sort of brash talk may attract attention, it isn’t good for negotiating reform. Ironically, Christie actually has a good reform proposal. Christie’s pension committee calls for a cash balance plan, a type of defined benefit plan that accrues benefits evenly rather than the bumpy accrual of the current backloaded plan. The cash balance plan would provide better benefits for early and mid-career teachers who get shortchanged by the current plan and better fiscal housekeeping for the system.

But Christie’s politics are preventing this reform from moving forward. The teachers’ unions are still fuming over the Governor’s decision to go back on his promise and shortchange the pension fund.

As Christie continues to play with fire, however, he may stymie the state’s chance for genuine reform of its pension systems.

*Cross posted from Teacherpensions.org’s blog.

California’s pension debt is dizzying. The state’s collective unpaid pension debt is now $198 billion, up from $6.3 billion in 2003.  The California Teachers’ Retirement System (CalSTRS) makes up over a third of this debt, $74 billion unfunded. (These numbers look even bigger depending on what discount or interest rates are used.)

Complicating matters, the state can’t reduce any future benefits under an obscure, rigid legal doctrine known as the California Rule. Under the rule, workers are basically promised the same or better benefits as laid out on their first day of work; workers get what they’ve earned so far as well as future earnings. (A new ballot initiative may allow for structural reform and better public accountability, but is still up in the air.)

Put this together and it means that a younger generation of workers are stuck with the state’s massive bill. As we write in our new TeacherPensions.org report, pension reform cuts typically fall on new workers, and now is the worst time in the past three decades to be a new teacher.

See TeacherPensions.org for more info on California and other states, including interviews with former San Jose Mayor Chuck Reed and current Executive Director of the California School Employees Association, Dave Low.

*Cross posted from Teacherpensions.org’s blog.

California’s water drought has been in the news lately, but the state is also facing a growing shortage of teachers. A new Bellwether report looks at how to strengthen California’s teacher supply–and improve the quality of teacher preparation at the same time.

*Cross posted from Teacherpensions.org’s blog.

It’s back to square one for Chicago pensions: last Friday a city judge ruled unconstitutional a pension law that would have reduced benefits for city workers. The ruling is a tough blow for the city’s finances and could worsen the situation for new and future workers, including teachers.

For Illinois taxpayers, it feels a lot like Groundhog Day. Chicago’s pension reform law, albeit a slightly different spin, like the state’s 2013 pension reform law, attempted to reduce cost-of-living adjustments for current workers. And like the state law, the city court says the cuts violate the state’s constitution. Even if the case goes to appeal, it’s highly likely that the city’s attempt to cut benefits will again be deemed illegal just like the state’s attempt, which was finally upheld as unconstitutional last spring.

Paying the price for massive debt are the city’s workers. On the books, the city judge’s ruling is a win for the Chicago Teachers’ Union and other unions who filed the suit. But it’s a significant loss overall for the city’s new and future workers and teachers who now need to eat the costs of growing debt. Chicago, like the state, already instituted drastic cuts for its new teachers through a previous plan in 2011. New teachers hired after 2011 face negative net benefits for the first two decades of work because the value of their contributions exceed their future pension benefits. And they don’t qualify for Social Security. For the city’s schools, last year’s pension contributions ate up 11 percent of the Chicago Public Schools’ operating budget, or nearly $1,600 per student.

Chicago is running out of options. Without the pension law, which would have allowed the court to enforce full funding to the laborer’s and municipal employees funds, the city lacks any checks to ensure adequate funding. Moody’s recently downgraded the Chicago Public Schools’ debt ratings to junk status, now matching the city’s rating, because of poorly funded pensions; the S&P cut the city’s rating again because of chronic structural debt. Governor Bruce Rauner’s recent pension bill would allow Chicago and other municipalities to file for bankruptcy, a mechanism which would allow the city to start over, restructure its past debt, and reform its pensions plans (but even in this case, there would be obstacles around when Chicago could actually file because of the way the city reports its debt).

The city desperately needs structural reform to clean up its financial mess and to ensure adequate benefits for its teachers and municipal workers. Until then, Chicago’s public workers, teachers, and taxpayers will be expected to foot the bill.

*Cross posted from Teacherpensions.org’s blog.

New Jersey teachers are still angry with Governor Chris Christie for shorting the pension fund and are now suing for $4 billion total in damages. While teachers have absolutely every right to be mad with the Governor—who after all, broke his own promise and law—teachers are also severely shortchanged by the pension system itself. Over half (55 percent) of the state’s new teachers won’t meet the minimum 10-year service requirements to qualify for a minimum pension benefit. Even for teachers who do qualify for benefits, these teachers will most likely end up paying more towards the system in contributions plus interest than what they will get back in return, losing money overall.

Christie’s pension commission proposed a fiscally responsible plan that would overhaul the current system and provide better benefits for new early and mid-career teachers. Unfortunately, however, it looks like Christie’s politics may jeopardize the chance for true reform.