Feeling the Squeeze: Pension Costs Are Crowding Out Education Spending; The Focus On Adult Employment

Josh McGee

Taxpayer contributions to teachers’ retirement plans are expected to grow substantially over the next decade. But the underfunding shortfall is so large that aggregate pension debt will also continue to grow. Retirement costs per pupil are already approaching 10% of all education expenditures. Without meaningful reform, these costs, as well as the aggregate pension debt vowed to teachers’ plans, will continue to rise and continue to crowd out education spending on the state and local levels.
Per-pupil spending on equipment, facilities, and property fell by 26% between 2000 and 2013, likely resulting in a growing backlog of expensive repairs and replacements that will need to be made sometime down the road.

+Spending on instructional supplies (e.g., textbooks) declined by 10% per pupil. More than half of states (29) spent less per pupil on instructional supplies in 2013 than in 2000; in several states, the decline was substantial: Arizona (37%), California (30%), Michigan (39%), and Oklahoma (30%). Teachers’ salaries overall were basically flat between 2000 and 2013, and retirement benefits were reduced in almost every state, sometimes by very large amounts.

The vast majority of taxpayer contributions into teachers’ pension plans are now used to pay down pension debt owed for past service rather than to pay for new benefits earned by today’s teachers. As the value of this debt has increased, most current teachers have experienced stagnant salaries and reduced retirement benefits, while pending on classroom supplies, equipment, and building upkeep has declined relatively or even absolutely.

Related: A focus on adult employment.