- The Washington Times - Friday, February 18, 2011

Ohio taxpayers, like their colleagues in Wisconsin, know all too well about the high cost of generous defined-benefit pensions and other compensation deals struck by states, districts and affiliates of the National Education Association (NEA) and American Federation of Teachers (AFT). A 57-year-old Ohio teacher with 35 years of experience receives an annuity equal to as much as 88 percent of his final year’s salary, along with guaranteed annual cost-of-living raises of 3 percent. It’s why the average retired teacher in Ohio collected $54,784 in 2010, an amount 15 percent higher than the state’s median household income.

With Ohio struggling to close an $8 billion budget shortfall in its two-year budget and wrestling with $47 billion in teachers’ pension deficits and unfunded retiree benefits, state officials want to end the deal. Late last month, the state’s Teachers Retirement System proposed increasing teacher contributions to pensions from 10 percent to 14 percent over the next three years and cutting cost-of-living increases by a third. The state’s NEA affiliate, already protesting about an effort to end collective bargaining, is even more displeased about the pension moves. Nevertheless, they will likely pass muster with Gov. John Kasich and the Republican-dominated legislature.

If the teacher-contribution increases are approved, Ohio would be the latest state to revisit the pensions and pay packages that have made teaching the most lucrative profession in the public sector.

The high cost of compensation for teachers and other public-sector workers came to focus last week when teachers organized by the NEA affiliate in Wisconsin took off work (often violating the very contracts their union negotiated) to protest the effort by Gov. Scott Walker, a Republican, to scrap rules that allow unions to force districts and other government agencies to the bargaining table. The fact that Wisconsin teachers are compensated to the tune of $77,857 a year and make meager contributions to their pension made taxpayers in the state even less sympathetic to their cause.

But the bigger battle is over pensions. Within the past year, normally union-friendly New York, Vermont and New Jersey have either decreased retirement benefits or increased employee contributions in order to end pension deficits. This year, Wisconsin is pushing to do the same and may be joined by other states, including Oklahoma and Florida. More states will soon consider more drastic measures in the form of moving new teachers onto private-sector-style defined-contribution plans. As a result, the NEA and AFT are in a defensive posture at a time when they already are battling both President Obama and reform-minded governors in both parties over school choice and teacher accountability.

Driving these moves is the fact that states face $260 billion in shortfalls over the next two fiscal years, along with at least $1.4 trillion in teacher pension deficits and unfunded teacher retiree costs, and concerns about the abysmal performance of the nation’s public schools. Taxpayers, legislators and governors finally are concluding that pensions and other elements of traditional teacher pay are neither fiscally tenable nor effective in improving student learning.

Pensions and other aspects of teacher compensation date 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 childbearing age from unfair dismissals. Pensions came into the picture as part of the development of the emerging civil-service sector.

By the 1960s, the packages became more lucrative through the efforts of the AFT and the NEA, which successfully forced school districts into collective bargaining and led crippling strikes in New York City and elsewhere. The packages were affordable, thanks to the fourfold increase in education spending (in constant 2007-08 dollars) between the 1959-60 and 2007-08 school years.

The unions could justify the pensions, along with the rest of the pay packages, because there was no way to evaluate effectively and manage the performance of teachers. But a statistical technique called value-added assessment, which allows for the measurement of student test-score growth, has emerged. This means teachers can be evaluated, giving states and school districts the ability to subject teachers to private-sector-style performance management.

But it is the ever-growing burden of pensions that is forcing states to reckon finally with the bargains they struck long ago with NEA and AFT locals. States spend $68 billion in pensions, $16 billion more than they did five years ago; the average state spends 34 cents on benefits for every dollar of teacher salary, versus 28 cents in 2003-04. Overly optimistic investment assumptions, along with the string of bull markets over the past three decades, allowed states to cover up the full burden. But the collapse of the financial markets, disclosure requirements enacted by the Government Accounting Standards Board, and the move by Moody’s Investors Service to treat pension underfunding as debt in its bond ratings is forcing states finally to end the generous deals.

It may be the high cost of teachers’ pensions more than federal accountability measures such as the No Child Left Behind Act that force the nation toward the kind of changes school reformers have long been seeking.

RiShawn Biddle is editor of DropOutNation.net and co-author of “A Byte at the Apple: Rethinking Education Data for the Post-NCLB Era” (Thomas B. Fordham Institute, 2008).