Out of Control Policy Blog

Public Pension Reform: Free the Teachers

In the New York Daily News, charter school Biology teacher, Emmanuel George, makes the case for teacher pension reform.

The good news is that charter schools like Democracy Prep have shown there is a better retirement solution - one that's better for students, for the system and most of all for teachers. It's called a 403(b) defined contribution plan, the public-sector equivalent of a 401(k). Under these plans, public charter school teachers like me get paid more, have greater control over our retirement, and have the same flexibility afforded other professionals like lawyers or architects.

With a pension, most teachers are forced to contribute a set percentage of their base salary, and the district is typically forced to contribute an additional percentage. With a 403(b), I choose how much to contribute to the fund over time, and my school matches my pre-tax contributions. Because my school doesn't have to make onerous pension contributions, I take home at least 20% more pay than I would in the Department of Education in base salary and performance bonuses. That means every year I have an additional $15,000 I can invest as conservatively or aggressively as I like.

That model better suits the increasingly mobile lifestyle of today's teachers. If an emergency or a job offer compels a move out of state, my investments and the interest move with me. At Democracy Prep, after just five years, 100% of my school's contributions are mine to take with me as well.

With pension plans, teachers often must work decades in order to be eligible to receive the maximum retirement benefits; that effectively hurts younger teachers who may choose to spend less time in a given school system, or in the profession. Most importantly, charter schools like Democracy Prep invest the money they save on pension costs and fees directly into teachers and into the classroom.

People argue that my 403(b) is riskier than a pension fund, because it's in the market. But pension funds were exposed to the same derivatives that contributed to the financial collapse. The difference is, I choose how much risk to expose myself to; with pensions, everybody - including the taxpayers - is on the hook for bad investments.

Read the whole thing. This piece makes similar arguments as Reason's recent California pension reform study by Adam Summers: How to Fix California's Public Pension Crisis.

And commentor, teacherharlem, writes in response to the Daily News story that he is trapped in a public school because of his pension:


I love the idea of getting paid 20% more with more freedom as well to go to a safer, cleaner, better charter school, but I've got 7 years left at DOE before I can retire. Even though I prove his point about traditional public school teachers, I also prove George's point that this is a crazy system! I want to leave my school/DOE but I can't. I'm locked in, just like my students, at a terrible school. I hope that we can bring real choice to students and teachers in harlem in the years ahead.

Lisa Snell is Director of Education


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