States have also cut benefits for new members. As extreme examples, newly hired teachers in Illinois and Ohio are now receiving a negative retirement benefit — on average, they will contribute more of their own money than they’ll ever get back in benefits.
Like Ponzi schemes, teacher pension plans also assume that new members will continue to be added to the system as it grows over time. But what if those assumptions are no longer correct? What if membership numbers start to flatline or even decline?
Student Enrollment Is Falling
The school closures in the wake of the COVID-19 pandemic led to an immediate decline of 1.4 million public school students (a 2.8% decline). This stemmed from a number of factors: a rise in homeschooling, a shift to private schools, kindergarten delays, and some students who were simply missing.
It may sound crass, but pension plans are concerned about their membership, not students. And thanks to the combination of rising state budgets and a one-time infusion of $190 billion in federal funds, district budgets have remained strong and the lower student enrollment has not translated into a meaningful decline in pension plan membership. The 10 largest teacher pension plans ended the 2021-22 school year with a combined 1,480 fewer members than they had at the same time in 2019, a decline of just 0.05%.
But the disconnect between student enrollment and pension system membership can’t last forever. State budgets are starting to plateau, and the federal money will run out in September of next year. Meanwhile, enrollment is projected to continue falling. Lower immigration and declining birth rates will cause student enrollment to fall through the rest of the decade. The National Center for Education Statistics now projectsthat public schools will lose an additional 2.4 million students (4.9%) between now and 2031.