Explanation of How Millionaire Teacher and Adminstrator Pensions are Taxpayer Funded in the Kirkwood School District
Tuesday, August 23rd, 2011 @ 3:45PM
We reposted information from Taxpayers United of America on the “Top 100 Millionaire Teachers and Administrators in St. Louis County” recently and had a slew of comments. Some accused us of misrepresentation:
Regarding those people who are receiving their pensions from Public School Retirement System aka (PSRS): 1. it is A PRIVATE ENTITY! It is not owned by the State of Missouri. The money that is in it the mutual funds of the teachers!! 2. The teacher/administrator CONTRIBUTES 7.5% of their paycheck to the fund each pay period! 3. The school District matches that amount!! 4. The PSRS is well known in the managed fund community to be one of, if not best managed funds in the US.
and this one:
I was contacted by a taxpayer who wishes to remain anonymous with a response to those above comments. As the taxpayer gave quite a bit information on teacher pensions in this taxpayer’s district, I am printing the response on the blog, rather than in the comment section. Perhaps it would be a good idea to go to your school district to determine how pensions and retirements are structured in your own district. You can access the retirement and pension information for Springfield, Jefferson City and Kansas City from Taxpayers United of America here.
Here is the taxpayer’s response to the above comments:
With all the back and forth readers’ comments I’ve read regarding the “Top 100 Millionaire Teachers and Administrators” posted Tuesday, August 16th, I requested to write a post to address comments made that relay false information. Having spent the last four years asking questions of my own school district’s financial officers as well as those of other districts, calling people at DESE, county assessors’ office, etc., I believe I possess a solid base of facts and understanding of how the public education system works monetarily, at least in my own district (Kirkwood). The retirement system teachers and administrators enjoy is just one aspect of that whole, but a critically important one.
One of the first comments made was that the blog was creating a false impression that taxpayers foot the bill for teachers’ pensions. I agree with the respondent who challenged this with by stating that since school districts are 100% funded by taxpayers, ergo, taxpayers DO fund teachers’ pensions. In Kirkwood, 4.5% raises were given to teachers and administrators over a 4 year period (’07-’10). Three of these years have seen our economy absolutely TANKING for the private sector. When questioning the rationale of these high raises, especially in these economic times, Board members told us that the 4.5% increase “doesn’t all go into the teachers’ pockets, since we’re offsetting the state mandated increase they must contribute to their pension fund.” Same thing for increased premiums for their health insurance…those additional costs to the employee were ADDED to the merit portion of the raise so that the teachers’ take-home pay wasn’t decreased.
Question: When does someone in the private sector receive a raise that the employer INCREASES above and beyond one’s merit increase, to help offset increasing medical premiums or to help Joe Blow employee afford putting more aside in his 401K for retirement? It just doesn’t work that way in the private sector. But since the state MANDATES the amount teachers must contribute, I presume school boards feel they must offset this amount when raises are handed out. At the end of the day, larger raises and salaries to teachers and administrators mean having to ask taxpayers for tax increases more frequently and in larger amounts. So yes, taxpayers DO fund teachers’ salaries, and thus, the contributions they make to their retirement accounts.
Teachers and administrators have a formula which is used to calculate what they will get when they retire. That amount is taken by averaging the last 3 years of a teacher’s salary before retirement, and applying a percentage to it. Many teachers bump up their last three years’ salary by taking on “extra duty” contracts to increase their overall pay during these last 3 critical years when the math is being done. Then, upon retirement, which can be at an extremely early age (53 in the case of a couple of my teacher friends) the teacher gets roughly 2/3 of the average of the last 3 years’ salary FOR LIFE. So the comment made that teachers’ pensions average only 40% of what their salary was is not accurate. It IS true teachers do not participate in Social Security, however.
I agree that the PSRS is probably very well managed in terms of returns. I just want to know how it can be that such HUGE retirements are GUARANTEED to teachers for life? Isn’t the PSRS investing in the same mutual funds and stocks that all the other retirement funds do? Why don’t we in the private sector see similar retirement returns? The reason the teachers’ retirements are so huge is because UNIONS negotiated with the state to set the amounts of the teachers’ retirement plan, how the formula is applied, which in turn dictates how much teachers will receive upon retirement.
The comment made about 50/50 contributions between employee and employer being quite common in the private sector is correct…..but with one exception. Private employers typically CAP the amount of their 50% side of the contribution into a 401K. For example, I might only receive a 50% contribution to my 401K from my employer on the FIRST 6% of what is put in. It isn’t on the entire contribution made, unlike the teachers.
The system is imbalanced. Comparing the public teacher and administrator pension system to social security, a Social Security recipient must wait till at least age 62 to draw funds from SSI. A private sector worker also contributes to SSI throughout their entire career, just as the teachers do. If that worker happens to be a fairly high wage earner, he will probably see about $1500 a month from SSI, or around $18,000 a year. However, if he continues to work at a second job or career AFTER starting to draw SSI, the amount of SSI will be reduced significantly if his earnings go over a certain threshold. Teachers and administrators, on the other hand, can take a second career (fairly easy to do when you retire at age 53) and their pension is not reduced one iota based on the earnings they receive in that second career.
Is this a sweetheart deal for teachers and administrators? You bet! But it is the right of taxpayers to ask for fairness and some semblance of balance when THEY ultimately are the ones footing the bill! The old tired accusation of not caring about kids is ridiculous.
Just because some have started minding the “school store” doesn’t mean we’re old crabs who don’t care about the education of kids. We just want to know, in this case, how do bloated pensions really do help students? If anything, they put the kids’ education more at risk in the long run, because at some point, taxpayers just won’t have any more to give, and will just say “no” to tax increase requests. Because these increases are for educational expenses, and admittedly a critical issue, we’re not allowed to ask any questions or make observations based on facts? Sorry, folks, the days of the blank checkbook are gone.
If the teachers were on the receiving end of this treatment, and main street private sector employees were getting the fat retirement checks on the backs of the teachers, you can bet there would be a cry to the heavens about how unfair the system is. But in the reverse, don’t dare question the sacred cow of educational spending.