How Well Do Teacher Pension Plans Serve Charter and Urban Teachers? Cory Koedel Shawn Ni Michael Podgursky P. Brett Xiang Department of Economics University of Missouri - Columbia Prepared for the 7 th Annual CALDER conference. Washington DC , Jan. 23-24, 2014 Views reflect those of the researchers. 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 • Conclusions 6
Note: excludes retiree health insurance & Employee contributions Source: Costrell and Podgursky (2009), updated at http://www.uaedreform.org/downloads/2013/12/quarterly-employer- contribution-chart-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
Teacher Employment Trends Year 2002 2007 2012 KC Traditional 2,213 2,118 1,125 KC Charter 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 STL Charter 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 9
Teacher Employment Trends Year 2002 2007 2012 KC Traditional 2,213 2,118 1,125 KC Charter 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 STL Charter 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 10
2014 Retirement Pension Contribution Rate in Three Missouri Teacher Pensions Plans 40.0% 33.9% 35.0% 29.0% 28.4% 30.0% 12.4% 25.0% 12.4% 14.5% Social Security 20.0% 5.0% Teacher Employer 15.0% 8.0% 10.0% 16.5% 14.5% 5.0% 8.0% 0.0% KC STL PSRS 11
Retirem ent 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 12
• Significant enhancements to all three plans during 1990’s. • These contribute to legacy costs (UAL) – KC: 1993 formula multiplier = 1.5% • 1999 = 2.0% – STL: 1999: formula multiplier raised from 1.25% to 2% – All Retroactive 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 Missouri PSRS STL Number of Teachers 1896 64124 2778 Share of MO Teachers (%) 2.7% 93.4% 3.9% In Social Security Yes No Yes Vesting (years) 5 5 0 Retirement Eligibility 60/5, Rule of 75 60/5, any/30, Rule of 80 65/5, Rule of 85 Teacher 7.5%, District Teacher 14.5%, District Contribution Rates 7.5% 14.5% Teacher 5.0%, District 11.1% 2.5% 1-30 yrs, 1.55% 31+ Multiplier 2.00% yrs 2.00% Early Retirement 55/5 55/5, any/25 60/5 CPI, compounded, up to COLA ad hoc 80% ad hoc 15
Pension Wealth Cash Annuity 16
Pension Wealth Accrual for Representative Kansas City Teacher in all Three Missouri Systems 1000000 900000 Kansas City 800000 PDV of Pension Wealth ($2013) 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 Pul l 1000000 Kansas 900000 City 800000 PSRS PDV of Pension Wealth ($2013) 700000 600000 St. Louis 500000 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 Kansas 900000 City 800000 PSRS PDV of Pension Wealth ($2013) 700000 600000 St. Louis 500000 400000 300000 200000 100000 0 24 29 34 39 44 49 54 59 64 69 74 Age 19
Experience and Age of Teacher Retirees: 1993, 2002, and 2007 (Missouri ) 1993 2002 2007 Mean 27.1 27.6 26.4 Experience Median Experience 28 29 28 Mean Age 58.7 55.7 56.5 Median Age 59 55 56 N 875 1612 1648 Trend toward later retirement in other sectors and other industrial nations: Gendell ( 2008) Burtless, (2008) Source: Ni, Podgursky, Ehlert, 2009 20
• What is the probability a new teacher makes it to the top of the hill? • In STL and KC (charter or non-charter) – very low 21
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012 100.0% 90.0% 80.0% 70.0% PSRS 60.0% 50.0% 40.0% 30.0% PSRS STL and KC Charter 20.0% KC STL Charter 10.0% STL Traditional KC Traditional 0.0% 0 1 2 3 4 5 6 7 8 Years Experience 22
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012 100.0% 90.0% 80.0% 70.0% PSRS 60.0% 50.0% 40.0% 30.0% PSRS STL 20.0% STL Charter 10.0% STL Traditional 0.0% 0 1 2 3 4 5 6 7 8 Years Experience 23
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012 100.0% 90.0% 80.0% 70.0% PSRS 60.0% 50.0% 40.0% 30.0% PSRS KC 20.0% KC Charter 10.0% KC Traditional 0.0% 0 1 2 3 4 5 6 7 8 Years Experience 24
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012 100.0% 90.0% 80.0% 70.0% PSRS 60.0% 50.0% 40.0% 30.0% PSRS STL and KC Charter 20.0% KC STL Charter 10.0% STL Traditional KC Traditional 0.0% 0 1 2 3 4 5 6 7 8 Years Experience 25
Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012 100.0% 90.0% 80.0% 70.0% PSRS 60.0% 50.0% RG & Normandy 40.0% PSRS 30.0% KC Charter 20.0% STL Charter STL Traditional 10.0% KC Traditional RG and Normandy 0.0% 0 1 2 3 4 5 6 7 8 Years Experience 26
Pension Wealth Accrual for Representative Kansas City Teacher and Estimated Probably of Retention to Given Age 800000 100.0% 90.0% 700000 Kansas City 80.0% Pension Wealth 600000 KC Charter 70.0% PDV of Pension Wealth ($2013) Retention 500000 Retention 60.0% KC Trad. Retention 400000 50.0% 40.0% 300000 30.0% 200000 20.0% 100000 10.0% 0 0.0% 24 29 34 39 44 49 54 59 64 Age 27
Pension Wealth Accrual for Representative Saint Louis Teacher and Estimated Probably of Retention to Given Age 700000 100.0% 90.0% 600000 Saint Louis Pension Wealth 80.0% 500000 70.0% PDV of Pension Wealth ($2013) STL Charter Retention Retention 60.0% 400000 50.0% STL Trad. Retention 300000 40.0% 30.0% 200000 20.0% 100000 10.0% 0 0.0% 24 29 34 39 44 49 54 59 64 Age 28
Expected Pension Wealth in Kansas City, Discounted to Age 55 for Teachers with Different Expected Survival Rates $318,061 $350,000 $300,000 Expected Pension Wealth in 2012 Dollars $250,000 $200,000 $150,000 $100,000 $54,316 $53,416 $50,000 $0 Kansas City Traditional Teacher Kansas City Charter School Teacher Hypothetical PSRS Teacher 29
Expected Pension Wealth in Saint Louis, Discounted to Age 55 for Teachers with Different Expected Survival Probabilities 30
Estimated Survival Probabilities for New Teachers: 2004-05 SASS Teacher Follow Up Survey 1 0.9 0.8 0.7 0.6 Prooportion 0.5 0.4 0.3 Low Poverty 0.2 High Poverty 0.1 Charter School 0 0 1 2 3 4 5 6 7 8 31
Conclusion • More general research agenda. Do results generalize to: – Charters in other states? – Cohorts of new urban teachers in other states? – Other school reform strategies? • TFA • High quality alternate route programs (TNTP) • Retirement security: DB/DC/CB 32
Recommend
More recommend
