The False Promise of Public Pensions

The vast majority of public employees--including teachers--are enrolled in defined-benefit pension plans. These plans are usually the product of state legislation that determines eligibility, benefit formulas, employer and employee contributions, and how payments will be calculated when an employee retires or leaves the system. Once an employee has become vested in a pension plan, they are guaranteed retirement income based on that formula. Teacher pension systems pose two challenges for K-12 schooling. The first are the temptations of "irresponsible fiscal stewardship." The second challenge is that pension arrangements "hinder efforts to boost teacher quality" by making it more difficult to attract talent in the contemporary labor market. Fiscal crisis and the alignment of the political stars have helped some states and localities to address the first challenge, yielding more sustainable benefit levels. However, reforms have done little to rationalize these systems for a changing labor market. Addressing the pension challenge is not merely a matter of technical patches; it is a question of politics. In this article, the authors discuss the politics and the false promise of public pensions and present a story which illustrates that it is only when the gloom of crisis finally descends that public officials muster the will to address the mismatch between promises and resources. They describe four simple truths that characterize public pension politics and offer three tacks that pension reformers might take in the political landscape.