Last month, Bellwether Education Partners published a misleading new report ranking teacher pensions in every state across America. Not surprisingly, given the organization’s past advocacy against pensions, the report is littered with falsehoods and inaccurate information about pensions’ ability to provide a secure retirement.
Below, we illuminate the most glaring missteps in their “findings,” revealing what the facts say about public pensions instead.
- Untruth: Defined-benefit pensions are not portable.
“Defined-benefit retirement plans…are less portable if teachers change careers or move across state lines,” Bellwether Education Partners claims in the introduction to their research. However, we’ve illustrated that pensions have a reasonable amount of portability.
Same as with employee-provided 401ks, all pension plans will refund public employees if they leave public service before retirement. A majority of them will also refund employee contributions with interest. Furthermore, most systems will also allow members to purchase service credits for different types of government service, including out-of-state government service. If a hypothetical public employee moved across state lines, they would likely be able to maintain their benefits by acquiring these service credits.
Organizations like Bellwether Education Partners falsely state that pensions are not portable because they have an ulterior motive; to promote defined-contribution plans as a “better” solution for a state’s finances and public employees’ retirement security. Time and time again, however, the states that have moved their newly hired public employees from a defined-benefit plan into a defined-contribution plan have paid a high fiscal cost for doing so. And because defined-contribution plans do not collectively pool risk, members are more susceptible to losing their retirement savings in a market downturn, making them a poor fit for public employees’ retirement security.
- Untruth: Pension spending can threaten spending on public education.
Another fabrication contained in the report is that “pension debt incentivizes system leaders to direct operating dollars toward paying down debt, rather than to instructional supports or classroom resources.” This is another statement that does not hold up to scrutiny.
The National Conference on Public Employee Retirement Systems (NCPERS) has found that pension contributions do not crowd out spending on public education in every state. They have also shared that if there were no public pensions, the overall economy and taxpayer revenues would be negatively impacted. According to NCPERS, in 2016, “public pensions contributed $1.3 trillion to the national economy and $277.6 billion to state and local revenues,” making them an economic engine and critical source of tax revenue for communities across the country.
- Untruth: Most states carry large unfunded liabilities that can imperil their plans.
Another problematic element of Bellwether Education Partners’ report is that they attempt to compare teacher state retirement plans by ranking them based on factors such as their unfunded liabilities. Comparing states using this metric is deceiving and ignores the reality that most pension plans are well-funded.
Bellwether Education Partners also seems to insinuate that unfunded liabilities operate similarly to household debt, in that plans need to be as close to a 100% funded status as possible to be considered financially sound. However, unfunded liabilities are not structured in the same way as household debt.
An unfunded liability simply indicates that a system does not have enough assets to pay benefits to all current and retired public employees if all benefits were cashed out in that specific moment of measurement. The system will never need all of that money at one time because public employees will pay into the system for decades with each and every paycheck, which will then allow the fund to gain optimal investment earnings over a longer period of time. Examining states based on their unfunded liabilities is not necessarily an accurate way to frame a pension plan’s fiscal health.
This latest “research” from Bellwether Education Partners should be taken with a very generous grain of salt compared with the facts about pensions and how they provide a secure retirement for our country’s dedicated public employees.