The Public Pension Crisis Is An Especially Big Threat To Women
© Dreamstime


The Public Pension Crisis Is An Especially Big Threat To Women

Women are the largest group enrolled in troubled pension systems.

When it comes to fostering the financial empowerment of women through public policy, we think of issues such as equal pay, paid maternity leave, and affordable childcare. However, there is an under-the-radar issue that may soon negatively impact millions of women—the country’s growing pension debt.

State and local governments have promised retirement benefits to millions of workers, many in professions predominantly occupied by women, but haven’t saved the money needed to keep those pension promises. As of today, public sector retirement systems are 73 percent funded, meaning they have just 73 cents for every dollar of benefits they’ve already guaranteed to workers. Nationally, there are at least $1.6 trillion in unfunded public pension liabilities.

This isn’t a red or blue state issue. The California State Teachers’ Retirement System, the largest teacher retirement system in the country, serves over 900,000 educators but its unfunded pension liabilities were $144.6 billion in 2017. The Teacher Retirement System of Texas is serving more than 1.5 million people and its unfunded liabilities have skyrocketed from none in 2001 to $35.5 billion in 2017.

Fifty-four percent of all public sector employees are women and about 77 percent of teachers are women, making them the largest group enrolled in these troubled pension systems. As a result, the long-term retirement security of the roughly 12 million women who are teachers and public employees is in jeopardy. In some states, teachers do not even participate in Social Security — meaning many are relying entirely on the pensions from their teaching careers. If those pensions are cut, many could be left with no other retirement income.

As governments struggle to pay down pension debt, they are also having to divert more and more money into employer pension contributions. Today, public pension contributions average out to approximately 26 percent of the total payroll costs that governments pay, a number likely to climb. The figure is already far worse in states with severe pension solvency issues, like Illinois and Kentucky, where employer contributions exceed 50 percent of the total payroll costs of their largest plans.

With pension debt payments consuming a larger share of government budgets, that also means pensions are eating up money that might’ve gone toward salary increases for teachers and public employees. So pension debt means teachers aren’t getting pay raises today and may never see the retirement benefits promised to them.

Public pension promises are, in most cases, considered to be legally binding. The unfortunate truth, however, is that many public sector retirement systems are in such massive debt that there simply isn’t enough money to fulfill the promises that governments have made to public workers. Public workers in financially-strapped Detroit, for example, have already seen their retirement benefits cut as governments dealt with bankruptcy and financial decline.

Adding to the potential problems for women and public workers is how the very structure of the typical public pension retirement system reduces employee options and mobility. Getting the maximum out of a public pension usually requires spending most, if not all, of your career in one pension system. Most public pensions system contributions cannot be transferred, creating problems for workers who need to, or want to, relocate. Additionally, the value of the retirement benefits normally soars after 25 years of service, which is a high bar for today’s modern, more transient worker. And worse, those who do choose to leave public employment before vesting in their pensions (typically at five years), forfeit nearly all of the employer contributions made on their behalf.

The outdated structure, lack of portability and financial distress of public pension and teacher retirement systems are a threat to all taxpayers but should be of special concern for those seeking equal economic empowerment for women.

Pension debt is increasingly crowding out wage increases and the earning potential of teachers and others. Millions of dedicated women go to work each day as teachers and public servants. They’re understandably expecting the retirement benefits they’ve been promised to be there when the time comes. If lawmakers are going to keep those promises, public pension systems need to be modernized and fully funded.

This column originally appeared in the Orange County Register.

Stay in Touch with Our Pension Experts

Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

This field is for validation purposes and should be left unchanged.