-By Larry Sand
How much is that sweet retired teacher who lives down the street draining from your bank account? As the public employee pension mess worsens in California, little Rhode Island shows a way out.
In last week’s post, I focused on “air time,” a little known scheme in California and 20 other states that allows teachers and other public employees to pad their pensions at taxpayers’ expense. Also, not very well known is just how many of Joe and Jill Taxpayer’s tax dollars are going into the pockets of retired teachers.
In California, teachers contribute 8 percent of their pay to their retirement system. Where do the rest of the contributions come from? The current rates include 8.25 percent from the teacher’s employer and 2 percent from the state. But wait a minute. Who is the teacher’s employer? It’s the school district. In Los Angeles, for example, most school district money comes from the state, some from the federal government and the rest is local revenue. Hence, the employer’s contribution is all really the taxpayer’s burden, as the state, city and feds generate no money on their own. So it would be much more honest to say that 10.25 percent comes from the taxpayer.
Let’s look at the taxpayer’s responsibility another way. Sandy, a teacher I know, worked for 24 years in CA and retired at age 61. The amount of money she contributed into the system at retirement (including interest accrued along the way) was about $150,000. Sandy started collecting a pension of about $40,000 year (plus a yearly 2 percent COLA increase) for life. Whatever interest this money accrues over the next few years, Sandy’s contribution will have evaporated in about four years. So, at age 65 she will start living off other people’s money – whatever the “employer” (i.e. taxpayers) kicked in, whatever the “government” (i.e. taxpayers) kicked in and whatever is left, the taxpayers will have to fork over.
Should Sandy live to be 80, 15 years of her pension will be coming from the taxpayer – about $600,000 worth. (Note: there are about 755,000 current and retired teachers in the state as well as another 1.6 million in the California Public Employee Retirement System who can and are taking advantage of this system.)
Can anyone justify this? Hardly. The question then becomes what to do without impoverishing retired teachers and other public employees, while at the same time stopping the rip-off of taxpayers.
First, those who are retired need to show good will and agree to take a cut in their pensions. Additionally, those districts offering virtually free health care for life – many teachers are required to contribute only miniscule co-pays — need to curtail their generosity.
An example of what can be done just took place in Central Falls, Rhode Island. About to go under due to its suffocating union contracts, the city convinced firemen and cops to agree to accept a cutback in their pensions. Accomplished in a Democrat controlled state, maybe there is some hope for the rest of the country. Rhode Island State Treasurer Gina Raimondo recently gave a talk at the Manhattan Institute where she explained that they pulled off such a feat with “political nerve and good judgment.”
“The plan enacted in November cuts $3 billion of the state’s $7 billion unfunded liability by raising the retirement age, suspending cost-of-living increases until the pension system is 80% funded, and even moving workers into a hybrid plan that has a smaller guaranteed annuity along with a 401(k)-style defined-contribution plan.
“‘We decided we owe each other a bright future,’ said Ms. Raimondo, who said she and fellow Democrats (as well as Independent Governor Lincoln Chafee) came to the conclusion they could no longer afford the lavish promises made to state workers without destroying economic opportunity for everyone.
“‘More government revenue wasn’t an option because Rhode Island already suffers from the nation’s 5th highest state and local tax burden—a full 10.7% of per capita income, according to the Tax Foundation. Everyone in the pension system had to give something, from new employees to retirees.’ But a key to reform, Ms. Raimondo said, was to avoid blaming these beneficiaries for the mistakes of the past. ‘No finger pointing’ was her mantra, along with a corollary: ‘Math, not politics.’
“The first step was an education campaign to explain why a tiny state could not afford an unfunded liability that was more than $7 billion and headed north. This also helped to blunt union opposition. Once there was a consensus that the problem was real, citizens were ready to consider solutions.
“Ms. Raimondo said those solutions had to be discussed openly. Rhode Island’s reform process was so transparent that even when a draft bill to implement the changes leaked to the press before its formal introduction, it was essentially a nonstory because the reforms had already been discussed publicly.”
Those of us in California need look at what has happened in Rhode Island – recognition of a big problem, honest dialogue about it, transparency, shared sacrifice and a move to privatization – and start the ball rolling in that direction. Teachers and other public employee pensioners need to come forth and be a part of the process. They need to recognize that pension fund managers are clueless Pollyannas and that their unions have conned them by insisting that the current system is sustainable. This cannot happen too soon. If we don’t do something in the near future, the state could conceivably go into default and we could see the current exodus of business owners and taxpayers become a full-fledged stampede if California’s fiscal malaise gets any worse. I wonder how many Californians can fit into sensible little Rhode Island?
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Larry Sand began his teaching career in New York in 1971. Since 1984, he has taught elementary school as well as English, math, history and ESL in the Los Angeles Unified School District, where he also served as a Title 1 Coordinator. Retired in 2009, he is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues – information teachers will often not get from their school districts or unions.
“CTEN” was formed in 2006 because a wide range of information from the more global concerns of education policy, education leadership, and education reform, to information having a more personal application, such as professional liability insurance, options of relationships to teachers’ unions, and the effect of unionism on teacher pay, comes to teachers from entities that have a specific agenda. Sand’s comments and op-eds have appeared in City Journal, Associated Press, Newsweek, Townhall Magazine, Los Angeles Times, San Diego Union Tribune, Los Angeles Daily News, San Jose Mercury News, Orange County Register and other publications. This past May, after his weekly blog proved to be very popular, he began writing a monthly article for City Journal, the Manhattan Institute’s policy publication. He has appeared on numerous broadcast news programs and talk radio shows in Southern California and nationally.
Sand has participated in panel discussions and events focusing on education reform efforts and the impact of teachers’ unions on public education. In March 2010, Sand participated in a debate hosted by the non-profit Intelligence Squared, an organization that regularly hosts Oxford-style debates, which was nationally broadcast on Bloomberg TV and NPR, as well as covered by Newsweek. Sand and his teammates – Terry Moe of the Hoover Institution and former U.S. Secretary of Education Rod Paige, opposed the proposition – Don’t Blame Teachers Unions For Our Failing Schools. The pro-union team included Randi Weingarten, president of the American Federation of Teachers. In August 2010, he was on a panel at the Where’s the Outrage? Conference in San Francisco, where he spoke about how charter school operators can best deal with teachers’ unions. This past January he was on panels in Los Angeles, San Diego and San Mateo in support of National School Choice week. Additionally, CTEN has hosted two informational events this year – one addressing the secret agenda that is prevalent in many schools these days and the other concerning itself with California’s new Parent Trigger law. The latter event was covered by both the English and Spanish language press.
Sand has also worked with other organizations to present accurate information about the relationship between teachers and their unions, most recently assisting in the production of a video for the Center for Union Facts in which a group of teachers speak truthfully about the teachers’ unions. At this time, he is conferring with and being an advisor to education policy experts who are crafting major education reform legislation.
CTEN maintains an active and strong new media presence, reaching out to teachers and those interested in education reform across the USA, and around the world, with its popular Facebook page, whose members include teachers, writers, think tankers, and political activists. Since 2006, CTEN has experienced dramatic growth.