New York City’s teacher pension costs have nearly quadrupled over the last 15 years. If it were a state, its teacher retirement costs would be the highest in the country. Once you include the contributions employees make to the pension plan, plus Social Security taxes, New York City is paying higher retirement rates than Chicago, which is itself an outlier. In percentage terms, the New York City and its employees are contributing more than 50 percent of salary toward retirement benefits.
And yet, as I note in a new report out this week, New York keeps cutting the benefits teachers actually receive.* Compared to prior generations, members hired after 2012 pay higher contribution rates than their predecessors did (aka they will earn less in take-home pay), they’ll have to serve longer to qualify for any retirement benefit at all, and they’ll receive lower pension benefits when they retire.
Due to the most recent round of cuts, I found that New York City’s latest benefit tier (Tier 6) would provide adequate retirement benefits only to teachers who serve for at least 23 consecutive years in the city’s public schools. Needless to say, most New York City teachers do not remain that long.
In an op-ed for the New York Daily News, I write:
Continuing to cut benefits for generation after generation of teachers is an unsustainable path. Instead, New York City leaders should look toward alternative models to keep costs in check while ensuring that all teachers are on a path to a secure retirement, no matter how long they serve.
Read the op-ed for the short version of how New York City got to this place, or read the full report for possible solutions.
*Note: While the plans are technically distinct and the funds are kept separate, the benefit rules I’m describing are essentially the same for New York City teachers as they are for teachers across the entire New York state.
–Guest post by Chad Aldeman
Check out FAFSA completion rates by poverty rate in your state, via this cool tool by Bill DeBaun for the National College Access Network. In my home state of Virginia, for example, students in the highest-poverty schools have FAFSA completion rates that are about 15 percentage points lower than in the lowest-poverty schools. That is, the students who could benefit from the FAFSA the most are the least likely to complete it. Check out how your state looks.
99 percent of public community colleges use standardized tests to determine which students are ready for college-level math, and 98 percent do so in reading and writing, finds a new survey by the Center for the Analysis of Postsecondary Readiness.
Mike Antonucci finds that the number of people working in education employed by local governments increased by 8.5 percent last year. That’s not all teachers, but the public education system as a whole is growing much faster than student enrollment.
Do teachers value all forms of compensation equally? I have an interview up today with Barbara Biasi, a Yale economist with a recent paper looking at what happened in the wake of Wisconsin’s Act 10. That bill cut teacher take-home pay (by increasing pension contributions) and made it illegal for districts to negotiate over salary schedules, leading districts to introduce new forms of performance pay. It also led to a wave of teacher retirements, but Biasi was able to exploit variation in the timing of the policy changes to analyze whether the salary or pension changes were most responsible. Perhaps not surprisingly, she found that even late-career teachers were much more sensitive to salary changes than they were to pension changes. While this was an instance where the state was trimming spending, it provides another piece of evidence that teachers value $1 in salary spending much more than they do $1 in benefit spending.
I also have a new column up today for The 74 about New York City’s teacher retirement plans. The city automatically enrolls all new teachers in a defined benefit pension plan with all the typical problems–it’s under-funded, back-loaded, and has a 10-year vesting requirement (which would be illegal in the private sector). Meanwhile, the city also offers teachers a voluntary retirement plan which could offer the city a path forward for a more fiscally responsible, portable benefit for workers.
–Guest post by Chad Aldeman