Transcript Teacher Pension Systems and Charter Schools

Missouri Teacher Pension
Systems and Charter Schools
Michael Podgursky
Cory Koedel
Shawn Ni
Department of Economics
University of Missouri - Columbia
Prepared for the Missouri Public Charter Association Annual Conference. October,
2-4, 2013. Views reflect those of the researchers. The authors thank Brett Liu for
Excellent research assistance. The usual disclaimers apply.
1
2
St. Louis Superintendent Kelvin Adams said rising pension costs are part
of the overall budget constraints forcing the closure of two schools next
fall — Sherman Elementary and L’Ouverture Middle.
The district’s pension obligations, Sullivan said at the forum, “cannot be
used to educate students. It cannot be used to pay teachers. The money
cannot go into the classroom where many think it should be invested.”
Note: Employer ARC for PSRSSTL. 2010 = 8.27%, 2014 = 16.5%
3
4
So Principal Lynne Glickert began recruiting a candidate from St. Louis
County, a teacher whom she calls “amazing.”
But the teacher turned the job down. The reason: To work at Grand Center
Arts Academy, a charter school, she’d have to switch to the city teachers’
pension system.
“I wish they had a choice,” said Glickert, who has run into this predicament
before. “For her, it’s about the retirement.”
Some charter school leaders point out that most of their staffs will never
even draw a pension. Teachers at charter schools tend to be younger, work
for less pay, and switch jobs at a much faster rate than those at St. Louis
Public Schools. Based on historical data, half of teachers at charter schools
will leave after one year, according to the pension system’s annual report.
Just one out of three will remain in the system after three years. Becoming
vested requires five years of employment.
5
Overview
•
•
•
•
National context
Missouri Institutional Context
Incentives in DB Plans
Benefits and Costs for Charter Schools versus
Traditional Schools
• Options for Reform
• Conclusions
6
Note: excludes retiree health insurance &
Employee contributions
Source: http://www.uark.edu/ua/der/People/Costrell/Employer_Contributions_Update.pdf
7
Missouri Situation
• 3 Systems and No Reciprocity
• Kansas City PSRS (3% of MO teachers)
– Teachers and staff
– In Social Security
• State PSRS (93% of MO teachers)
– Teachers, not in SS
• STL PSRS (4% of MO teachers)
– Teachers and staff, in SS
8
Year
2002
2007
2012
2,213
2,118
1,125
353
445
771
KC Total
2,566
2,563
1,896
Index
100.0
99.9
73.9
Charter %
13.8%
17.4%
40.7%
STL Traditional
3,155
2,502
1,934
115
282
835
STL Total
3,270
2,784
2,769
Index
100.0
85.1
84.7
Charter %
3.5%
10.1%
30.2%
PSRS
61,008
64,218
64,124
Index
100.0
105.3
105.1
KC Traditional
KC Charter
STL Charter
9
Year
2002
2007
2012
2,213
2,118
1,125
353
445
771
KC Total
2,566
2,563
1,896
Index
100.0
99.9
73.9
Charter %
13.8%
17.4%
40.7%
STL Traditional
3,155
2,502
1,934
115
282
835
STL Total
3,270
2,784
2,769
Index
100.0
85.1
84.7
Charter %
3.5%
10.1%
30.2%
PSRS
61,008
64,218
64,124
Index
100.0
105.3
105.1
KC Traditional
KC Charter
STL Charter
10
Retirement Pension Costs as a Percentage of Salary for
PSRS, Saint Louis, and Kansas City
30.00%
PSRS
25.00%
Percentage Contribution
20.00%
STL
15.00%
KC
10.00%
5.00%
0.00%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
11
2014 Retirement Pension Contribution Rate in
Three Missouri Teacher Pensions Plans
40.0%
33.9%
35.0%
30.0%
29.0%
28.4%
12.4%
25.0%
12.4%
20.0%
14.5%
Social Security
Teacher
5.0%
Employer
15.0%
8.0%
10.0%
16.5%
5.0%
14.5%
8.0%
0.0%
KC
STL
PSRS
12
• What are effects on teacher staffing and
quality?
• What are incentive effects over life cycle?
• Is this the best policy for charter schools or
urban schools generally?
13
Typical Final Average Salary DB teacher pension
Annual
Pension = S x FAS x r(S,A)
S = service years
FAS = final average salary
r(S,A) = replacement factor
Age and /or service criteria for regular retirement
Note: No link to contributions
14
KC PSRS
Missouri PSRS
STL PSRS
Number of Teachers
1896
64124
2778
Share of MO Teachers (%)
2.7%
93.4%
3.9%
In Social Security
Yes
No
No
Vesting (years)
5
5
0
Retirement Eligibility
65/5, Rule of 85
Multiplier
60/5, Rule of 75
60/5, any/30, Rule of 80
Teacher 7.5%, District Teacher 14.5%, District
7.5%
14.5%
2.5% 1-30 yrs, 1.55% 31+
2.00%
yrs
Early Retirement
55/5
60/5
COLA
ad hoc
55/5, any/25
CPI, compounded, up to
80%
Employer Contribution (%)
7.5%
14.5%
5.0%
Employee Contribution (%)
7.5%
14.5%
15.1%
Contribution Rates
Teacher 5.0%, District 11.1%
2.00%
ad hoc
15
• Significant enhancements to all three plans
during 1990’s.
• These contribute to legacy costs (UAL)
16
Pension Wealth Accrual for Representative Kansas City Teacher in all Three
Missouri Systems
1000000
900000
Kansas City
PDV of Pension Wealth ($2013)
800000
700000
PSRS
600000
500000
St. Louis
400000
300000
200000
100000
0
24
29
34
39
44
49
54
59
64
69
74
Age
17
Pension Wealth Accrual for Representative Kansas City Teacher in all Three
Missouri Systems
Pull
1000000
900000
Kansas City
PDV of Pension Wealth ($2013)
800000
700000
PSRS
600000
500000
St. Louis
400000
300000
200000
100000
0
24
29
34
39
44
49
54
59
64
69
74
Age
18
Pension Wealth Accrual for Representative Kansas City Teacher in all Three
Missouri Systems
Push
1000000
900000
Kansas City
PDV of Pension Wealth ($2013)
800000
700000
PSRS
600000
500000
St. Louis
400000
300000
200000
100000
0
24
29
34
39
44
49
54
59
64
69
74
Age
19
Wealth Accrual Under Old and
New Rules in KC-PSRS
250000
Pension Wealth (2013 $)
200000
150000
Old Rules
100000
New Rules
50000
0
24
34
44
54
64
74
Age
20
• Who makes it to the top of the hill?
• In STL and KC relatively few new teachers
21
100.0%
Retention of New Teacher Hires: Cohorts of New Teachers Hired
Fall 2005 - Fall 2012
90.0%
80.0%
70.0%
PSRS
60.0%
50.0%
40.0%
30.0%
PSRS
KC Charter
STL Charter
STL Traditional
KC Traditional
20.0%
10.0%
0.0%
0
1
STL and
KC
2
3
4
Years Experience
5
6
7
8
22
100.0%
Retention of New Teacher Hires: Cohorts of New Teachers Hired
Fall 2005 - Fall 2012
90.0%
80.0%
70.0%
PSRS
60.0%
50.0%
40.0%
30.0%
PSRS
20.0%
STL
STL Charter
10.0%
STL Traditional
0.0%
0
1
2
3
4
Years Experience
5
6
7
8
23
100.0%
Retention of New Teacher Hires: Cohorts of New Teachers Hired
Fall 2005 - Fall 2012
90.0%
80.0%
70.0%
PSRS
60.0%
50.0%
40.0%
30.0%
PSRS
20.0%
KC
KC Charter
10.0%
KC Traditional
0.0%
0
1
2
3
4
Years Experience
5
6
7
8
24
Mobility Costs
• Backloading means crossing pension plans
(PSRS to KC or vise versa) produces huge
losses in pension wealth
• Particular problem in recruiting school leaders
• Median transition to a first principal position
in MO is 38.
• Details in C. Koedel, J.Grissom, S.Ni, M.
Podgursky. (2011)
25
Leadership SLLA Scores and
Undergraduate Institutions
Table 9. Licensure Exam Scores and College Quality for School Leaders: PSRS, KC, STL and PSRS Neighboring
Districts.
PSRS
All
Licensure Exam Scores
Average Score
N (leaders)
College Quality: All
High Quality
N (leaders)
College Quality: MO Specific
High Quality
Low Quality (Public)
N (leaders)
Avg. % Free/Reduced Lunch
Avg. % Disadv. Minority
Districts
Kansas City Region
KC
Neighbor
Schools
(PSRS)
St. Louis Region
STL
Neighbor
Schools
(PSRS)
178.2
(7.4)a,b
4,099
172.8
(7.2)
163
179.8
(7.0)a
261
175.1
(7.1)
222
178.8
(7.3)b
322
0.174
(0.379)a,b
8,873
0.112
(0.316)
339
0.184
(0.388)a
803
0.077
(0.267)
377
0.233
(0.423)b
1101
0.187
(0.390)a,b
0.064
(0.245)a,b
7,089
0.083
(0.276)
0.223
(0.417)
193
0.177
(0.382)a
0.056
(0.229)a
575
0.078
(0.269)
0.566
(0.496)
295
0.262
(0.440)b
0.162
(0.369)b
809
31.7
7.1
539
59.9
70.9
1
23.9
27.1
11
70.8
83.3
1
29.6
45.0
21
26
Illustration of Mobility Costs
PSRS: Age 38 Mover
500000
450000
PSRS Principal
400000
PSRS Teacher
Dollars (2009)
350000
300000
250000
200000
PSRS to KC
Principal
150000
100000
PSRS to STL
Principal
50000
0
37
42
47
52
57
62
67
72
Age
27
• Movement of principals would double if they
were in same pension system.
• Similar findings for teachers
– Koedel, Ni, Podgursky (2013)
28
Policy Recommendations
• Transparency
– Compute “what if” five year scenarios
– Compute Normal Costs for charters and district
– Compute life cycle PW calculations for educators
– Elect or appoint charter school representatives to
pension boards
29
Policy Recommendations
• Explore closing the plans to new members and
freezing as much accrual of new liabilities as
legally possible
– “transition costs” (economic nonsense)
• Transition all new STL and KC teachers to a less
expensive and mobile retirement benefit
– Cash balance or Defined Contribution
• Charter schools outside of KC and STL should
have option to partially or totally opt out of PSRS
30
References
•
R. Costrell and M. Podgursky. “Reforming K-12 Educator Pensions: A Labor Market Perspective.” Policy Report. New York:
TIAA-CREF Institute. (February, 2011). http://web.missouri.edu/~podgurskym/articles/files/Reforming_K12_Ed_Pensions.pdf
•
R. Costrell and M. Podgursky. “Distribution of Benefits in Teacher Retirement Systems and Their Implications for Mobility”
Education Finance and Policy. Vol. 5 No. 4 (Fall, 2010), pp. 519-557.
http://web.missouri.edu/~podgurskym/articles/files/EDFP_a_00015.pdf
•
R. Costrell and M. Podgursky. “Golden Handcuffs.” Education Next Vol 10 No. 1 (Winter 2010), pp. 60-66.
http://educationnext.org/files/ednext_20101_60.pdf
•
R. Costrell and M. Podgursky “Teacher Retirement Benefits.” Education Next. Vol. 9 No. 2 (Spring 2009), pp. 58-63.
http://media.hoover.org/sites/default/files/documents/ednext_20092_58to63.pdf
– Updated data: http://www.uark.edu/ua/der/People/Costrell/Employer_Contributions_Update.pdf
•
R. Costrell and M. Podgursky. “Peaks, Cliffs, and Valleys: The Peculiar Incentives of Teacher Pensions.” Education Next. Vol.
8 No. 1 (Winter 2008), pp. 22-28. http://media.hoover.org/sites/default/files/documents/ednext_20081_22.pdf
•
C. Koedel, S. Ni, M. Podgursky. “Who Benefits from Pension Enhancements?” Education Finance and Policy. forthcoming.
•
C. Koedel, S. Ni, M. Podgursky, “The School Administrator Payoff from Teacher Pensions.” Education Next. Vol. 13 No. 4
(Fall, 2013), 8-13.
•
C. Koedel, M. Podgursky, S. Shi. “Teacher Pension Systems, the Composition of the Teaching Workforce, and Teacher
Quality” Journal of Policy Analysis and Management. (2013) Vol. 32. No. 3, 574-596.
31
References
•
C. Koedel, J.Grissom, S.Ni, M. Podgursky. (2011) “Pension-Induced Rigidities in the Labor Market for School Leaders.”
http://www.caldercenter.org/upload/Koedel_Pension-Induced-Rigidities.pdf
•
C. Koedel, S. Ni, M. Podgursky. (2013) “Defined Benefit Pension Plans and Job Lock: Evidence from the Education Sector.
“http://economics.missouri.edu/working-papers/2013/WP1310_knp.pdf
•
Special issue of Education Finance and Policy: “Rethinking Teacher Retirement Benefits Systems”
http://www.mitpressjournals.org/toc/edfp/5/4
32