The root problem is unfunded pensions—not just the paychecks
NEW YORK, NY – Teachers across the country are unsatisfied with low salaries and a lack of resources, prompting a record number of teacher strikes over the past few years. While the prevailing narrative blames stingy politicians for the low pay, a recent report by Manhattan Institute senior fellow Daniel DiSalvo shows that the underlying cause of low pay is pension debts—not a lack of overall funding.
DiSalvo finds that while teacher salaries have declined over the past decade, overall education spending has actually increased. The problem is that more money has gone to fund growing teacher pension liabilities. Teachers’ pensions and other post-employment benefits (OPEB) are generous, but that money doesn’t appear in today’s take-home pay, frustrating many teachers. Many of these teachers, too, will never see these benefits: only those who stay in the same state or district for their entire career are typically eligible. While every teacher bears the cost, many teachers do not reap the rewards.
These legacy costs have caused teachers’ salaries to remain stagnant or decline in many districts, leading to the recent strikes. DiSalvo analyzes the effectiveness of these strikes and finds that even strikes that lead to increased paychecks only exacerbate staggering pension costs.
Key findings of the report include:
- Even though the costs of teacher pensions are at an all-time high, they’ve failed to offset total state pension debts, which continue to rise as well;
- Roughly 75% of teachers will be net losers from their pension plans, with many quitting or changing school districts before they’re eligible to receive their pensions;
- Legacy costs served as hidden drivers in the strikes in Arizona, West Virginia, Kentucky, Oklahoma, Colorado, and North Carolina—though few teachers and policymakers seem to identify the role they play in distorting funding allocations; and
- While certain strikes have been effective in raising teacher salaries, they have done little to improve teacher quality or educational outcomes.