Teacher pension plan earns high marks for solvency

Nationally, teacher pension programs are headed on a downward spiral, towards crisis — but Idaho’s system is relatively sound.

Idaho’s teacher pension system is nearly fully funded, with 93.9 percent of its liabilities covered, according to the National Council on Teacher Quality, a Washington, D.C.-based nonprofit group. Only six states’ systems are on stronger financial footing.

Fiscal stability was a key factor in the NCTQ’s state-by-state report card, issued Tuesday. Idaho’s pension program earned a “C” grade; nationally, the average grade was a C-minus.

The problem, according to the NCTQ, is that states cling to traditional, defined benefit pension plans — even in the face of spiraling debt. Nationally, teacher pension plans were saddled with $499 billion in debt in 2014, up from $394 billion in 2012.

“It is not news that there is a teacher pension crisis in the United States,” according to the report. “It should be news that little is being done about it.”

The centerpiece of Idaho’s system is one such defined benefit plan — administered by the Public Employee Retirement System of Idaho. While comparatively stable, Idaho’s system is not debt-free: Its unfunded liabilities totaled $397.5 million in 2014.

In addition to their growing debt, defined benefit plans pose another problem. The traditional plans, according to the report, “are out of step with what is needed to attract and retain the best and brightest to the teaching profession.”

Consequently, NCTQ recommends a series of reforms to Idaho’s system. Schools should match employee contributions to their optional, defined-contribution pension plan. Teachers should be fully vested in their defined benefits plan after three years, as opposed to the current five-year waiting period. About 30 percent of Idaho’s teachers leave the profession before they have the chance to vest in the system.

However, education groups are in no hurry to tinker with PERSI.

“(It’s) what our members count on,” said Penni Cyr, president of the Idaho Education Association.

During the recession, when teachers across the state weathered budget cuts and unpaid furloughs, PERSI remained solvent. This, in turn, encouraged many teachers to stay on the job and ride out the downturn, Cyr said. “It’s definitely a retention tool.”

For administrators on the other side of the bargaining table, PERSI is also popular.

“It’s one of the best (systems) in the nation,” said Rob Winslow, executive director of the Idaho Association of School Administrators. “Our membership loves it.”

The PERSI system doesn’t come cheap for school districts, which have to kick in an employer contribution rate of 10.39 percent. “From the trustees’ perspective, they see that as a great value for teachers,” said Karen Echeverria, executive director of the Idaho School Boards Association.

The NCTQ recommends allowing teachers to opt for a more flexible, portable defined contribution plan, such as a 401(k). Echeverria is skeptical. One of PERSI’s strengths is its pooling, she said.

But Wayne Hoffman — president of the Idaho Freedom Foundation, a conservative nonprofit group — says the PERSI system is fraught with problems. He’s not convinced the system is as solvent as the report indicates, and he believes Idaho should relax its vesting rules and encourage teachers to invest in 401(k) accounts.

Hoffman also says school districts are hamstrung by mandatory PERSI and Social Security contributions, which tie up dollars that could go into teacher pay raises.

NCTQ describes itself as a nonpartisan group, formed “to provide an alternative national voice to existing teacher organizations and to build the case for a comprehensive reform agenda that would challenge the current structure and regulation of the profession.”

Disclosure: Idaho Education News is funded through a grant from the J.A. and Kathryn Albertson Foundation, a funder of the National Council on Teacher Quality.

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