(HOST) The strike by teachers in Colchester is over. But commentator Allen Gilbert says an important financial commitment doesn’t come up during local negotiations.
(GILBERT) An important element was absent in the recent teachers’ strike in Colchester.
The element is an indirect financial commitment made to educators – it’s indirect in the sense that it’s not part of your annual school property tax bill.
The commitment is the state’s retirement fund for teachers and administrators. And some say that it’s significantly underfunded. Pensions aren’t part of the contracts that school boards and teachers’ unions negotiate. Pensions are never on the table.
Yet an educator could spend nearly as much time receiving money from the retirement fund as from a district pay check.
Why no discussion over this financial commitment?
Because it’s a state system, with no local oversight. And
it’s a complex system that few people understand.
The state’s educators have what’s called a “defined benefit” pension plan. Once you retire, you’re paid a set amount per month. That’s in contrast to a “defined contribution” plan.
That’s when you receive whatever you or your employer
actually paid into your retirement account, plus interest.
If you’re funding your own retirement through an IRA or 401(k) plan, you’ve got a “defined contribution” plan. It’s what most of us now have. In fact, only a portion of U.S. workers have “defined benefit” plans.
The state’s educator pension funds are complicated by the fact that recipients’ retirement checks aren’t based on what someone has earned over their total years of service. Instead, the checks are based on a recipient’s best three years of earnings.
That means it’s in an older teacher’s financial interest to move
from the district where they’ve worked for 25 years but have received only modest paychecks, to a district miles away where paychecks are higher. Stay in that distant district three years, and your retirement check grows considerably. An administrator who signs a yearly contract can similarly boost future pension checks by negotiating a higher salary the last three years of service.
There’s one more wrinkle. Because local districts set salaries,
and because pension checks are based on salary, the cost of educators’ retirement is created by local districts – but the bill is paid by taxpayers all around the state, through our state taxes.
If your town pays teachers less, teachers who retire in your town will get less than teachers from towns where school boards agreed to richer contracts. Yet you and others in your town will help pay the larger retirement check given to the teachers from the higher salary towns – as well as the retirement checks to teachers from your town.
The Vermont School Boards Association has long had a position that retirement benefits should be equalized across districts. Teachers with the same years of service and education should receive equitable pension checks, no matter if they taught in Proctor or Colchester. A state-funded system should treat recipients equally.
Discussions will no doubt continue over whether the state’s educator retirement fund is underfunded. But the system itself has some important weaknesses. Those weaknesses need to be addressed. If they’re not, the cost down the road – to all Vermont taxpayers – will only increase.
This is Allen Gilbert.
Allen Gilbert is a former journalist, teacher, and consultant currently serving as executive director of the ACLU of Vermont. He has a longtime interest in public policy issues.