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CalSTRS CEO Says: Don’t Mess With Teachers’ Pensions

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Modern School Donating Member (558 posts) Send PM | Profile | Ignore Tue Mar-15-11 11:00 PM
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CalSTRS CEO Says: Don’t Mess With Teachers’ Pensions
CalSTRS CEO Jack Ehnes criticized the Little Hoover Commission’s recommendations to slash CalSTRS, the California teachers pension system, calling many of its suggestions naïve or impractical. He also pointed out that many of its premises are wrong. For example, the trouble with the pension has nothing to do with “overly generous” payouts. In fact, teachers are lucky if they get back 60% of what they earned in their highest-earning years of services.

Gov. Jerry Brown (friend of teachers??) has been maneuvering in the back room with several Republican state senators to cut a deal that slashes CalSTRS in exchange for their support in floating a regressive tax extension on the June ballot. The move is completely unnecessary (CalSTRS is NOT in any kind of serious trouble), faces serious legal hurdles, and involves other serious challenges that draw into question its chances of even succeeding.

Brown made a promise to voters (a promise he was in no position to make) that he would hold K-12 funding constant and shield it from further cuts in 2011-2012 IF they approved an extension of current taxes. The problems with this plan are that he needs Republican support to even get the measure on the ballot and then the voters would have to vote for it (which is not a guarantee in these tough economic times). Indeed, voters should NOT vote for it. The plan is regressive and will take a much higher percentage of income from lower income workers than from the wealthy.

For teachers, the plan not only punishes them by cutting into their income (so the rich can continue to enjoy a lower overall tax burden), it also punishes them in the future, by cutting into their retirement. While changes to CalSTRS are most likely to affect new employees more than current employees, there are those who are screaming for across the board cuts to teachers’ pensions.

Another seldom discussed problem with going after teachers’ pensions, especially the two-tiered approach of protecting current teachers while providing decreased benefits to new teachers, is that it weakens the unions. Newer teachers will see how they got screwed and how their unions were complicit in it. They will then be much less likely to support the unions and participate in their campaigns and actions. Two-tiered benefits drive a wedge between workers, creating two different classes, with different interests and allegiances.

John Fensterwald, from the Educated Guess (http://toped.svefoundation.org/author/johnf/), discusses Ehnes’ critique in the following excerpts from his blog post: “CalSTRS CEO: Avoid Drastic Change”

“In a letter last week to Daniel Hancock, Little Hoover’s chairman, CalSTRS CEO Jack Ehnes dismissed as “impractical” the watchdog commission’s call for reducing the future benefits of current CalSTRS members and requiring that all public employees join and coordinate their benefits with Social Security.

Both of these ideas have been bandied about in various reform proposals. The five Republican senators are reported to advocate requiring new public employees to switch to a hybrid retirement plan similar to one imposed on federal employees a quarter-century ago. It would include a much smaller pension than what current workers receive, accompanied by a 401(k) match of up to 5 percent of their pay and Social Security benefits. Brown is reported to support much milder measures: capping the maximum amount of pensions and banning some of the pension-boosting tricks that have contributed to higher government costs.

To read the rest of Festerwald's analysis, please see http://toped.svefoundation.org/author/johnf/

Modern School
http://modeducation.blogspot.com/
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msongs Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-15-11 11:34 PM
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1. will Jerry go Obama on us and wve the white flag? nt
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ProgressiveProfessor Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Mar-15-11 11:56 PM
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2. Both CalSTRS and CalPERS have significant actuarial issues
to dismiss them is to ignore a serious risk to those of us who teach in CA.

The statement that "(CalSTRS is NOT in any kind of serious trouble" is either ill informed or ingeniousness.
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Modern School Donating Member (558 posts) Send PM | Profile | Ignore Wed Mar-16-11 10:07 PM
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3. The Pensions Are Fine
Average state public employee pensions can continue paying benefits at their current levels for another 13 years, even with the assets currently on hand and even with no increase in contributions. In California, the pensions are good for 15 years. http://4lakidsnews.blogspot.com/2011/03/why-employee-pensions-arent-bankrupting.html
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ProgressiveProfessor Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-17-11 12:23 AM
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4. Think again...
Bad investments and other losses have made them wobbly. They require well above market rates of return to regain the 100% funding required by CA law.

http://www.telegraph.co.uk/finance/3248452/Calpers-suffers-50bn-fall-in-pension-fund-assets.html
http://www.forbes.com/2009/01/07/intelligent-investing-calpers-real-estate-panelJan8.html
http://www.nytimes.com/2009/07/24/business/24calpers.html

In 2009, even their chief actuary concurred with the concerns. I an many other rely on them for our retirement.
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