US. How Lawmakers Can Raise Teacher Pay Without Decimating Pension Funds
When the pandemic hit, school districts across the country were in the process of giving their teachers a raise. But hiking teacher salaries now will strain state pension funds at a time when the economic fallout from the coronavirus is decimating public pension systems. In March, Moody’s Investment Service said U.S. public pension funds had already suffered nearly $1 trillion in investment losses.
Lawmakers can’t make lost assets reappear. But they can take a step that will reduce future losses and protect pensions: make any near-term teacher raises non-pensionable. Such a step could save governments billions. Down the road, those savings could protect K-12 teachers and students from cuts needed to service the debt.
If such a policy had been in place when the last recession began to hit budgets, the California State Teachers Retirement System (CalSTRS) would have saved 11%—$1.35 billion—on its liabilities between 2008 and 2010 alone. Illinois’ Teachers Retirement System (TRS) would have saved 18%—$438 million—over two years. That savings translates to lower pension bills for districts, which would have freed up more money at a time when it was desperately needed.
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