Six things about teacher pensions
Here are some things I've learned so far in my attempts to understand teacher pensions.
0. The first thing is a rule of thumb. If someone says there's a public pension crisis, they want to get rid of public pensions. In my reading, those who say there's a crisis typically they're critiquing the system to fundamentally change it, whether from the right (make everything 401k) or from the left (beef up social security).
Some other, more subtle things, follow from this insight.
1. There's a difference between a cost-side approach to the issue and a contribution-side approach.
On the one hand, the contribution perspective focuses on the quantity, quality, and history of contribution rates to pensions (how much individuals, districts, and states put into the pension), and the context in which these pension contributions occur: how they're calculated, how they're collected, how they're invested.
On the other hand, the cost perspective focuses on the cost of those contributions in an expansive sense: how high the costs are, how much these costs 'take' from other kinds of expenditures, and how unsustainable they might be for the pension in the long-term.
The two different approaches end up with different analyses and recommend different kinds of pension plans. Cost-side people are usually ringing an alarm about the crisis in pensions: the costs are increasing so much that we have to do something drastic. Typically, for cost-siders, this means pushing defined contributions plans to replace defined benefit plans because they cost less.
2. Contribution-side people are more measured in their analysis and tend not to advocate defined contribution plans (or maybe any radical change), sticking with assessment of defined benefit plans, though they can be squishy. Notably, contribution-siders are less likely to cry crisis. They'll note the difficulties, challenges, and puzzles that pensions present us, but they rarely say there's a crisis.
Because defined benefit plans are more solidaristic than defined contribution plans. So I think it's pretty safe to say, secondly, that a contribution-side approach is more solidaristic than the cost-side approach.
3. The cost-side perspective has a lot to answer for. There are pretty big holes in the cost-side perspectives I've read thus far.
It's neoliberal researchers that typically take the cost-side stance. From what I've seen, they cut corners and make logical and empirical leaps to push their market ideology. In general, by focusing on cost instead of contribution they conveniently ignore all the capitalist machinations that determine why the pension contributions are the way they are. (Furthermore, they don't have much to say about how social security could be beefed up to actually provide a public retirement plan rather than pensions--a subject for another post.)
4. It's important not to forget contribution when thinking about cost, because the ways that contribution rates get calculated are directly dependent on changing market conditions, investment decisions, and, well, capitalists, rather than greedy retiring teachers taking money away from students. This is the contribution-cost mistake, my fourth big insight.
The neoliberals also make some key logical leaps, chief among them that, since pension costs are high, school districts could be spending that money on other things. But the budgets!, they cry.
5. We know however that district and state expenditures for pension contributions--the accounting and budgeting details--get conveniently confused here, and it's not necessarily true that districts could be using that particular pension money for other things. In some cases that may be true, but the cost-side neoliberals don't linger on that subtlety. It's like the little boy crying wolf, but in this case it's crying budgets. That's the fifth thing I've realized.
But taking the cost-side critique seriously has certain benefits. We can know our enemy, of course, but also if the defined benefit plans are putting undue pressure, viz. cost, on school districts that creates bad working conditions for teachers and thus bad learning conditions for students, then we should think about how to address this problem in a solidaristic way.
Can we take the neoliberals' questions about cost as constructive criticisms and use them to strengthen our already-existing solidaristic policies, make them more functional, and even make them more solidaristic and serve the next generations of retirees better than current policies? Could we even use those criticisms to advocate for a fuller solidarity in retirement, something even better than pensions?
In the next few posts I'll look at this question, analyzing two recent cost-side arguments (one right and the other left, ideologically speaking) and then propose something myself.