It might not be on your calendar, but today is the first meeting of the Texas Pension Review Board this year. The PRB consists of seven members appointed by the governor to oversee public pension plans in the state. Recently, Gov. Greg Abbott appointed a new board chair: Josh McGee. If that name sounds familiar, there’s a reason. Josh McGee is employed by John Arnold’s foundation to promote anti-pension ideology across the country. Formally, McGee’s title is Vice President of Public Accountability at the Laura and John Arnold Foundation. He is also a senior fellow at the ultra-conservative Manhattan Institute.
Why did Gov. Abbott appoint Arnold’s right-hand man to oversee pensions in Texas? That’s a good question.
There’s no doubt where McGee stands when it comes to public pensions. He has written extensively about his desire to gut public pensions and subject teachers, firefighters, and other public employees to the mercy of the financial markets through risky 401(k)-style plans. Coincidentally, his boss, John Arnold, made billions of dollars as a hedge fund manager on Wall Street.
McGee has also published a number of misleading- or outright meaningless– reports about teacher pensions. In particular, McGee often claims that most teachers don’t stay in the profession long enough to earn their pension benefits. As a workplace recruitment and retention tool, however, pensions are designed to encourage teachers and other employees to remain in the profession, so they can improve their skills and gain experience. Also, while it is true that teachers make great productivity gains early in their careers when they are learning their jobs, this does not diminish the great value that older, more experienced teachers bring. In fact, several recent studies have found that teachers continue to develop their professional skills beyond the first 3-5 years and that teacher experience translates to more than just academic gains for students.
Finally, McGee mischaracterizes how pension benefits are accrued over the course of a teacher’s career. The longer a teacher stays in the profession, the greater his pension benefit will be; this is a function both of increasing salary and pension benefit credits being awarded by years of service. However, this does not take away from the value of a defined benefit pension for teachers who stay in the profession for less time. Even for the small percentage of teachers who leave before fully vesting in their pension, they still receive their contributions to the pension, plus interest, which is likely to be better than what they would have received through investing in the stock market.
There is mounting evidence that traditional defined benefit pensions are more effective at providing retirement security to teachers and other public employees. Earlier this month a new report out of University of California, Berkeley, found that for the overwhelming majority of California teachers, the defined benefit pension offered by CalSTRS is the best option for their retirement. Furthermore, for states that have experimented with closing their public pension plans, those experiments have been a disaster. West Virginia closed its defined benefit pension plan for teachers in 1997. By 2005, costs had skyrocketed and retirement security for teachers had plummeted. West Virginia decided to reopen the pension plan and funding levels have been steadily improving ever since. And for those West Virginia teachers forced into the failing 401(k)-style plan, 78 percent of them opted to join the reopened pension plan.
The appointment of Josh McGee as chair of the Pension Review Board was condemned by public safety groups at the time and for good reason. Putting a noted anti-pension ideologue in charge of overseeing pensions is akin to putting a fox in charge of overseeing the henhouse. While it may be too late for Gov. Abbott to revoke his appointment, Texas’ public employees and taxpayers must remain vigilant about McGee’s actions as chair of PRB: the retirement security of thousands of teachers, nurses, librarians, and others is at stake.