Collective Bargaining and Unfunded Pensions

Collective bargaining, teacher contracts, and arbitrators are how we run our schools now.

ISSUE OF THE DAY
The Sandusky Register (Ohio) got a copy of the arbitration between a school district and the teacher's union and put it online.

TT - These are the kind of labor negotiations that led to the bankruptcy of Ford and Chrysler. The salaries and benefits for every state and local employee are negotiated the exact same way.

Not only that, when they retire, we -- as the lucky taxpayers -- will pick up the cost of unfunded pension funds. And there are plenty of them. Everywhere you look. Some are worse than others.

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MICHIGAN - "Michigan's education time bomb: Costly, loophole-ridden retirement system threatens public schools" (One of three part series. Excellent analysis from the Detroit News of the problem that isn't unique to Michigan. Part 1 here Part 2 here Part 3 here )

The impact could be devastating to public education in Michigan, the only state that makes its schools bear the entire burden of retiree pensions and health care. This year's bill -- an estimated $1,015 per student -- is more than schools spend on books, buses, computer technology and building maintenance combined.
And it's going to get worse.

Michigan pays for lifetime health care for employees who, in some instances, work as few as five years in public schools.

The Detroit News is upfront about the reasons for the looming disaster.

Cobbled together by two decades of amendments, protected by a powerful union and ignored by a timid Michigan Legislature, the Michigan Public School Employees Retirement System (MPSERS) is headed for a financial crisis that could devastate schools and ultimately threaten the benefits of thousands of Michigan retirees.

Today, the school retirement system is buried under $25 billion in unfunded liabilities for retiree pensions and health care.

Check out their interactive Teacher Pension Legacy Cost. (Links to stories and extras at the bottom.)

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LLINOIS - In a story titled, "Six-Figure Public Servants," ABC7 Chicago says that of the 100 highest drawing pensioners in the state of Illinois, 94 are educators.

Official records show that 18 former state employees -- all of them university or public school educators -- each receive more than $200,000 a year in pension benefits. Most of it is covered by Illinois taxpayers.

"I don't blame the teachers for taking it. I blame the school boards for allowing it to happen. You have four soccer moms and dads on the school board with no concept many times of business practices," said Zettler.

The State of Illinois has a $40.7 billion unfunded liability.

TT - Blaming school boards and soccer moms is ridiculous. Teachers' unions make it a point to elect teachers to school boards and to legislatures for just this purpose.

At one time 40% of the legislators in Alabama were teachers, ex-teachers, or married to teachers. (Brimelow, Peter, "The Worm in the Apple," published by Harpers Collins, pg 81-82).

The most generous concessions to teachers come from legislators.

Unfunded Pensions

The state’s share of the pension bill for teachers alone is expected to soar from $80.2 million this year to a projected $94.8 million next year.

Jan 10, 2008 - In Rhode Island, the Speaker of the House submitted a bill to create a commission to study how to finance state pensions that are currently underfunded by $4.9 Billion.

New age-and-work requirements adopted by lawmakers in 2005 were aimed at stemming the growth in cost.

But longtime state workers and public school teachers can still retire at any age — and newer employees at age 59 — with an almost unheard of benefit in private industry: a defined-benefit pension that pays them up to 75 percent of what they were making in their final years of work, with guaranteed annual cost-of-living increases of up to 3 percent.

The average pension paid a retired state employee was $22,493, and retired public school teacher, $40,151, during the year that ended June 30.

With a $4.9-billion unfunded liability accruing interest at 8.25 percent per year through 2029, Rhode Island struggles every year to come up with enough taxpayer money to pay the annual tab.

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Rhode Island isn't the only state to have large unfunded pensions.

See HERE and HERE and HERE and HERE and HERE and HERE

Unfunded Pensions

When teacher retirement funds are unfunded to the tune of billions, the response in West Virginia is to seize one teacher retirement fund and merge it with another.

Jan 17, 2008 - After a hearing Jan 8, three of five Justices on the West Virginia Supreme Court of Appeals refused a petition of the West Virginia Consolidated Public Retirement Board for an appeal of Circuit Judge Paul Zakaib's decision that made the consolidation of two teacher retirement funds unconstitutional.

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TT - Unfunded teacher pensions are a major problem, but in West Virginia, it's worse than any other state. Continued here for space considerations.

Unfunded Teacher Pensions

Jan 16, 2008 - Governor Rell is hoping the State Bond Commission will approve the sale of $2 billion worth of bonds to help close a nearly $7 billion liability in Connecticut's teachers' retirement fund.

Revenue from the bond sale will be reinvested, with hopes of earning a higher rate of return. The new law also commits the state to fund the teachers' pension fund at 100 percent of recommended contributions, which the state failed to do from 1992 to 2005.

Previous entry on Connecticut's unfunded teacher pensions.
See Unfunded Pension entries.
Pew Study Finds States Face $2.73 Trillion Bill for Retiree Benefits PDF

Unfunded Pensions

TEXAS June 25, 2007 - The Texas Attorney General reports that there are 82 unfunded public pensions with liabilities of $23 Billion.

One of the worst is the Teacher Retirement System of Texas with an unfunded liability of $13.9 Billion.

Unfunded Teacher Pensions

CONNECTICUT News Story dated June 4, 2007 - The state of Connecticut wants to borrow $2 million worth of "pension obligation bonds" to help narrow the $6.9 BILLION dollars of unfunded teacher pension liability.

The investment income would go toward paying off the debt and replenishing the pension fund coffers. But some lawmakers said the state was taking too much of a financial risk. Rep. Shawn Johnston, D-Thompson, said the state would be better off setting aside surplus funds and also making regular payments for the pension fund.

"I think, quite frankly, we are taking a gamble with our teachers' retirement," he said.

The bill, which moves to the Senate, also commits the state to fund the teachers' pension fund at 100 percent of actuarial recommended contributions, something the state failed to do from 1992-2005.

TT - Explanation of the bonds here. If they make money on the investment, they'll spend it. If not, they'll just raise taxes.

WEST VIRGINIA

UNFUNDED PENSIONS

WEST VIRGINIA Sept 10, 2007 - From AP: The Legislature faces a potential price tag of as much as $215 million if it wants to aid the nearly 20,000 teachers and school workers whose 401(k)-style retirement accounts lack sufficient funds in all but a handful of cases.

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TT - Mind you, West Virginia received $804 million from tobacco securitization. (Selling all future tobacco settlement income to investors for a much smaller one-time lump-sum payment.) The $804 million was supposed to have assured the stability of the teachers pension fund.

See our collection of Unfunded Pension stories.

Webster, NEW YORK

May 5, 2008 - In Webster, NY, two candidates are running for the Webster School Board in an election scheduled for May 20. One is an incumbent and the other is Michael Suffoletto, 56, a school teacher who plans to retire this year.

The school district might face the loss of sales tax revenues.

The loss in sales tax revenue would be tough for the district, Suffoletto said, adding that some of the money goes to pay for state and federal mandates.“We’re hit with a lot of unfunded mandates,” he said, naming several, including the federal No Child Left Behind Act, which is geared toward improving the performance of primary and secondary schools.

TT - No Child Left Behind is not an unfunded mandate. It's accountability, something bad teachers and teacher unions oppose. We have long opposed teachers being elected to school boards unless they agree to recuse themselves from voting on teacher contracts. It's a blatant conflict of interest.

Random Testing for Steroids

May 22, 2007 - In an acknowledgement of the ubiguousness of steroids in professional sports and, increasingly, in schools, the Texas House has approved mandatory random steroid testing of Texas public-school athletes. The Texas Senate had approved a similar bill.

The Texas High School Coaches Association, the Texas Medical Association, and groups representing public school districts and administrators have testified in support of the Senate version.

TT - JUST A NOTE -- "Unfunded mandate" is teacher-speak for "money that could have gone to us." Gimme Gimme Gimme Gimme It's a typical response by teachers and their unions that demonstrates their priorities, and it isn't children. Children are at the very bottom of that list. It the reason why teachers and their unions resent the No Child Left Behind Act that documents their teaching faults, records it, publishes their failures, and demands change.

The most disgusting part about those teachers and unions is that they actively work to deprive children of the love of learning, the joy of reading, and the hope of advancement out of poverty.

COLORADO

Article Dated May 18, 2007 - Mike Rosen, writing in the Rocky Mountain News reports on SB 73 and why it died in "Education's union label".

In February, freshman Democrat, Sen. Chris Romer, sponsored a bill to require schools to adopt competency in the English language as a graduation requirement for high school students starting in 2012.

Rosen writes that Senate Education Committee Chair Sue Windels dismissed Romer as a "wild-eyed newbie," who just doesn't understand the way the game is played.

Under public pressure, the bill was rescued from the Appropriations Committee graveyard and was ultimately passed by the Senate 33-1 (Windels being the sole dissenter). In the final weeks of the legislative session, SB 73 was killed by Democrats in a party-line vote in the House Education Committee, preventing it from coming to the floor for a full vote in the House. Their lame excuse was that the bill would be an "unfunded mandate" on public schools.

He continues,

The ease with which this perfectly sensible bill was killed in the legislature is testimony to the death grip that the teachers' unions have over education in our state.

All four of the Democrats on the Senate Education Committee are current or former members of teachers unions. Of the eight Democrats on the House Education Committee, five come from the ranks of unionized teachers, one is the husband of a former teacher, and another was a winner of the Jeffco teachers union's "Friend of Education Award."

He concludes,

The teachers' unions spend lavishly to get their people elected to public office. As long as they're calling the shots in the state legislature, public education will continue to be subordinated to their special interest at the expense of students, parents and taxpayers.

TT - Outrageous. It's Colorado.

The Cost of Education

April 15, 2008 - Calculating the cost of education should include the lawsuits by a "handful of people" and their lawyers. Story

The dispute over who should pay the $1 million in court fees started with a 2005 court case.

A handful of employees enrolled in the Teacher and Employee Retention Incentive program sued the state over a law changing their benefits.

The S.C. Supreme Court expedited the case, ruling the state law changing the benefits was unconstitutional. Lawmakers, the court said, could not change the terms once the employee agreed to the TERI program.

Initially, a circuit court awarded $8 million in fees. That figure was reduced to $400,000 before the S.C. Supreme Court, on appeal, upped the final fees to $1,075,701.

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TT FOUND

The TERI program FAQ (from the S.C. Budget and Control Office of Human Resources)

The program was created in 2001 as a means of retaining teachers, however, by June 2005, 14,000 state workers chose the program, which allowed them to no longer have retirement deductions taken from their paychecks and begin getting pension benefits while continuing to work.

In 2004, the Greenville News carried an article by Sen. Greg Ryberg on why the program should be abolished. The page is no longer online, but is in the Google cache.

Individuals who are eligible for TERI are all members of the SCRS with 28 years of service, and they include county and municipal employees, state employees, teachers, and many elected officials!

Participants continue to receive their annual pay in addition to receiving retirement benefits that amount to about half of their annual salary (for example, TERI participants who make $50,000 annual salary will receive an additional $27,000 per year in retirement salary for a total pay of $77,000 per year).

The TERI participant permanently discontinues his 6 percent contribution to the retirement system, while the state continues to contribute to the employee's retirement fund. When the employee retires, at the end of the five-year TERI program, the employee collects his full retirement.

The result was the unfunded pension liability rose 1300%.

A bill was introduced to eliminate the program. Later SB 619 was approved that meant that an employee who enters the TERI program after June 6, 2005, is exempt from the State Employee Grievance Procedure Act and Employees beginning participation in the TERI program after June 30, 2005 will not receive payment for unused annual leave upon retirement and entering the TERI program and they will have to continue to contribute(6.25%) to the retirement fund. FAQ (from the S.C. Budget and Control Office of Human Resources.)

That latter was the basic dispute contention that they hoped would derail the whole reform.

Background story on effect of the change in law and the lawyers involved. SC Supreme Court decision. 26146 - Layman v. State of South Carolina The state refunded employee contributions to those enrolled in the program prior to July 1, 2005 who made contributions to the program. The Supreme Court later amended Laymen v. State of South Carolina to address, among other things, attorney fees.

THE ISSUE NOW is who will pay the attorney fees. The state budget committee determined that the S.C. Judicial Department would have to pay the lion’s share of the more than $1 million in attorney fees stemming from a lawsuit over retirement benefits. The House, Senate and Governor each would pay $175,000 of the $1,075,701 verdict; the Judicial Department, which last year had its request for $1.9 million to add six new judges denied by state lawmakers, would pay the rest.

It's a delicious irony, isn't it?

Methuen, MASSACHUSETTS

SICK (LEAVE) ABUSE

August 6, 2007 - Methuen school district has a proposed new policy on "sick abuse."

The policy, which has already been adopted for the contracts of other school employees, including administrators, is short on detail.

It does not say what discipline should be taken and only loosely defines "situations which suggest abuse" as "more than four absences which suggest a pattern."The vague language is on purpose, Superintendent Jeanne Whitten said.

Instead of functioning as a punitive tool, the policy is meant to help identify sick-leave abuse and to encourage employees and administrators to work out a solution, she said.

Under the policy as proposed, a meeting with a union representative is scheduled if a principal or supervisor suspects abuse by an employee. The supervisor then has five days to notify the employee if the "excuse for absence was deemed unacceptable." If discipline is to be used, the superintendent and union president are informed immediately.

The union president is "willing to consider" the proposal, but if the policy is implemented, the union will participate in any disciplinary discussions about sick-leave abuse.

School Committee member Gary Marcoux pointed to the lack of union resistance to the policy as proof that it is worth implementing.

TT - The problem with such news stories is that they leave more questions than answers.

Administrators get 18 sick days a year.
How many days do teachers get?

Exactly how many sick days were taken in the last school year by teachers?
How many teachers exceed the average?

Who exactly is in charge of their schools? The administrators or the union?

The Eagle Tribune knows the answers to those questions because they investigated and produced a series called "Marked Absent" written in 2003 on just this topic.

The region's attendance records also show patterns that suggest individual sick leave abuse. The analysis found more than 150 teachers who used a disproportionate amount of sick time on Mondays, Fridays or next to regularly scheduled breaks. Those teachers used a week's worth of sick time or more in 2001-02, at least three-quarters of which came before or after weekends or holidays.

And,

All those absences added up, the analysis found. More than 75,000 days taken throughout the region, including nearly 50,400 sick days, represented more than enough time to fill every teaching slot in the Gloucester school district for the entire year.

Read the whole thing. It's worth the time to find out what questions you should ask of your school board.

July 31, 2007 -The Eagle Tribune series on unfunded pension costs also makes good reading.
July 27, 2007 - A bookkeeper for the Methuen School Department was arrested for selling cocaine.

All in all, a great newspaper.

Chicago, ILLINOIS

About bloody time.

Feb 27, 2008 - The Chicago Public Schools Board of Education approved today a large turnaround and consolidation plan that will replace complete staffs at eight schools, close four elementary schools, move two schools and consolidate or phase out four others.

The four high schools in the turnaround plan had fewer than 13 percent of their students meet state standards last year. At Harper, for example, less than half of students graduate, and only five percent met state standards last year.

All teachers and administrators will be eliminated in the eight schools, though they may reapply for their jobs.

TT - It would be nice if they were doing this for the good of the students, but Illinois is in the middle of a budget crisis.

• Illinois faces a deficit for the current fiscal year, conservatively estimated at $750 million.
• The state has a $1.7 billion backlog of unpaid bills -- the highest in state history.
• The state's Medicaid program requires at least $500 million in new money just to meet existing obligations.
• The state's unfunded pension liability is among the worst in the nation.
• The governor sell anticipated future revenues at a discount in order to now receive a one-time lump sum.

It's a good thing they've turned out generations of illiterates who won't know - because they can't read - what bad shape the state is in. And, happily, the illiterates won't be making enough money to worry about tax increases, either. It's a two-win for politicians.

Teacher Retirement System

May 15, 2007 - A bill was introduced by state Sen. Harry Coates (R) to "fix" the teachers retirement system.

With a funded level of only 49 percent, it is currently the third-worst funded education pension system in the entire nation.

With the passage of SB 357, which will phase in higher employer contributions through increased state appropriations, we should be able to bring the funded level to about 80 percent by 2026, and to 100 percent within a few years after that. This is critical to ensure the pensions of tens of thousands of Oklahoma educators.

TT - the question is why should taxpayers contribute even more to a retirement system that should be self-funding? The reason why teachers don't pay Social Security taxes is because they opt out to join the generous teacher pension plans. If pension payouts exceed contributions, that, surely, is THEIR problem, not taxpayers. The obvious solution is that they should receive less benefits, commiserate with their contributions and pension fund earnings.

May 7th, 2006 [Date is correct.] news article that signalled the Governor would sign the bill.

SB 357 would increase the contribution requirements of school districts on behalf of its employees, contingent upon the Legislature providing the additional funding. It also would make sure dedicated revenue sources, including personal income tax, sales tax and use tax revenue, are not reduced, regardless of economic downturns or tax cuts.

The bill would cost about $10 million in the upcoming fiscal year and eventually would cost the state $60 million a year. If the funding is put in each year, the bill would put the state on track to fund the teacher retirement system at 80 percent by 2026.

Standard & Poor's recently ranked Oklahoma's pension funds 49th out of 50 states in percentage of unfunded liabilities. Only West Virginia fared worse.

See April 3, 2006 article in the Journal Record by William O. Pitts.

*Some* kind of reform

Feb 1, 2008 - Robert Flanders, a lawyer and a former justice of the Rhode Island Supreme Court, and the chairman of the Rhode Island Board of Regents, on Bold vision for R.I. school reform.
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TT - Flanders was nominated in 2006 by Republican maverick U.S. Sen. Lincoln Chafee to fill a vacancy on the 1st U.S. Circuit Court of Appeals in Boston, an offer President Bush did not take him up on. Flanders is very active in civic politics. In the appointment of Flanders as Chair Commission to Strengthen Research at the University of Rhode Island, his other appointments were noted and there are dozens. Not everyone, however, is enamored with the R.I. Supreme Court.

Flanders may, however, be a good choice to solve two major problems in education in Rhode Island - unfunded teacher pensions and teacher strikes that delay the opening of schools.

It is illegal for public school teachers to strike in Rhode Island but that hasn't stopped strikes. Historically, the teacher unions in R.I. have been politically active. In 1975, one-third of teachers in Rhode Island walked the picket line. (Time magazine)

Today, however, the state faces a serious fiscal crisis, largely due to the costs of education, the burden of teacher pensions and the untenable cost of providing health care for those retired teachers. The crunch means that the state anticpates even more labor action, which is why the governor appointed Flanders to a commission to study how those contracts are negotiated.

The NEA view is aptly expressed in this opinion piece that should be read before reading the Rhode Island Economic Snapshot produced by Sen. Chuck Schumer's (D-NY) committee. A press release from the state focuses on the problem that is both endemic (Look at the release date.) and historical. Spending is even worse.

In a 2006 press release, the governor notes that while inflation has risen at an average 2.9-percent annual rate during this period, the state has been increasing spending by almost three times the rate of inflation. That's not a national economic problem; it was a choice of political expediency.

It will take political will to solve the problem. But it shouldn't be called "school reform." Children are the very last concern of educrats or politicians or teachers unions. Otherwise, they wouldn't have graduated illiterates for decades while they literally bathed in filthy lucre.