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By Brett Arends

Don't blame the teachers.

You could buy a fair amount of school supplies for a student for $1,366 a year. Books, computers, educational games, you name it: 14 hundred bucks would get you a lot. It would especially make a big difference in any school in a poorer neighborhood.

So it's startling to hear that that's what taxpayers are paying nationwide instead, out of their education budgets, just to cover the skyrocketing costs of public school teachers' pensions.

Not salaries. Pensions.

And that figure has tripled in just 20 years--even after accounting for inflation.

But don't blame the teachers for living the high life, or for allegedly retiring on easy street. Blame the people who were supposed to be running these pension plans. And blame everyone--all of us, really--for taking our eyes off the ball as this crisis ballooned out of control over the past few decades.

That's because the lion's share of that money, about 70%, isn't going into future pensions: It's going just into filling the massive hole in the teachers' pension plans. That's over $900 per K-12 pupil per year.

In other words, it's going into paying bills that should have been paid in the past. Plus interest.

The costs of funding these pensions has gone through the roof even while pensions have been coming down.

These startling numbers come from a report by the Equable Institute, a nonpartisan think tank specializing in pension and retirement issues.

At the start of the millennium, says Equable, the total funding shortfall of all of America's teacher retirement systems added up to just $86 billion.

Today? Try $816 billion. More than nine times as much.

As a result, even though total U.S. K-12 spending has risen by 33% during that time, the amount of money going into the teachers' retirement systems has risen 220%.

This is what happens when a generation of politicians--and voters--keep kicking cans down the road, putting off hard choices till the never-never.

And what happens when everyone, including pension plan administrators, engage in fairyland finance, pretending that skyrocketing investment returns will magically come and balance the books.

Equable works out that about two-thirds of the entire funding shortfall that has emerged in the past 20 years has come from. well. from pension plan administrators being forced to do their math right.

Sky-high investment expectations, left over the madness of the late 1990s, have been drastically written down to more realistic levels. And generous, over optimistic assumptions about everything else, from inflation to life expectancies, have suffered the same treatment.

Equable says these costs are leading to "hidden education funding cuts," quietly eating into all the money that states, cities and towns have earmarked for education. Your school's budget goes up, but the amount you need to pour into the retirement plan to make it whole goes up even more. Then parents, teachers and taxpayers all wonder why they are paying more and apparently getting less.

It's not quite that easy, of course: It never is. Equable's own numbers show that even after deducting these retirement costs, average per-pupil spending nationwide has risen faster than inflation over the past 20 years. But averages can hide even more than they reveal: Many cities and towns will be flush with funds, while others will be plunged into crisis.

Across Pennsylvania, for example, teachers' retirement costs are now 10% of the entire education budget. 20 years ago they were less than 1%. In Illinois the figures have gone from 3% to 14% in the same period.

And the picture isn't getting better. In just 13 states the teachers' pensions are at least 80% funded--meaning they have at least $80 in assets for every $100 of liabilities. In five states the funding level is less than 50%.

South Dakota, Tennessee and Wisconsin are the only states where the pensions are fully funded.

This isn't a crisis in isolation. The aging of the U.S. population will sharply increase our national spending needs over the next few decades, on everything from pension payments to medical care and eldercare.

Social Security already has an unfunded liability of $20 trillion (over the next 75 years), dwarfing the debt owed by the teachers' pension plans. The trust fund is forbidden by law from borrowing a nickel, but unless or until Congress gets round to plugging the hole, that figure probably needs to be added to the national debt--which was already forecast to hit $46 trillion by 2033 anyway.

We don't have to find the money tomorrow or even soon, but as teachers, parents and taxpayers are learning the hard way, we will have to find the money.

-Brett Arends

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March 31, 2023 06:12 ET (10:12 GMT)

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