Teacher Retirement Navigating the New

Teacher Retirement

Navigating the New Financial Waters: Ongoing and Increased Problems Facing Schools Districts and Teachers

If the current financial situation facing the nation and the globe could be summed up in one word, that word would have to be "uncertainty." At no time since the Great Depression, and for quite some time prior to that, has there been so much cause for concern and worry regarding the current state of economic and financial affairs, or so much disagreement about what the future holds in both the near- and long-terms or the best ways to proceed given the situation at hand. There is not even really any agreement on exactly what the present world or national economic situation is; some analysts now claim that we are climbing out of the global recession, while others suggest that the problems might still be in the early phases, with worse shocks to the financial system yet to come.

Regardless of which theories and prognoses end up being correct, one thing is definitely not uncertain -- public and even many private schools, from the smallest elementary schools to large university and college systems, are facing definite financial difficulties in this period of cutbacks and reduced government and consumer spending. In the popular media, this has led to many stories about the simple reduction of teacher numbers, the increase in class sizes that this necessitates, and other news stories that describe egregious situations leading to a direct detriment of the quality of education being provided. But though these stories elicit more of a response from the general public than other, drier tales of economic woes in the educational system, other issues are at least as important for the teachers facing them.

Specifically, the issue of healthcare -- itself in the news quite a lot lately for entirely different, though related, reasons -- is a major concern for many teachers and professors, especially those nearing or surpassing the standard retirement age of sixty-five. Healthcare costs, both in terms of the actual amounts billed by medical service providers and the premiums charged for health insurance plans, have increased hugely over the past few years, and these costs can skyrocket exponentially following a professor or teacher's retirement. Both educators and educational institutions have made some decisions that have negatively impacted themselves in this situation, and there is some opportunity for better choices to be made that will enhance their financial position in these rough economic waters, but the problems facing teachers and schools show no signs of going away. The research below makes clear some of the entanglements that the current financial situation, as well as ongoing financial problems and burdens, have led to for educators, administrators, and the government (or private) agencies that fund them, presenting new understandings of the available information in a more comprehensive and cohesive manner.

Healthcare Benefits as Compensation

Benefits packages that include health coverage, though mandated in almost all educational institutions simply due to their size, have also been used as incentive programs for the attraction and retention of employees. This has allowed many educational institutions to offer pensions and retirement healthcare benefits as options to higher-paid teachers with more seniority, encouraging them to retire so that lower-paid and younger teachers can be hired, saving the institution money at least in the short-term (McElroy 2006). The problem is, many of these institutions -- as well as other businesses in the private and public sector -- are now defaulting on their contractual obligations, refusing to pay pensions or the agreed-upon healthcare benefit costs due to a lack of funds (McElroy 2006).

This situation, quite rightly, has many people both angered and worried. Convinced to take an earlier-than-necessary retirement in order to receive a more lucrative benefits package, most often also at the expense of reduced salaries during the years -- often decades -- of service that they have provided, teachers are basically being told that they are out of luck and are being left to fend for themselves in the current tumultuous sea of economics and healthcare changes (McElroy 2006). Though in many cases there simply are not the funds available to cover the businesses' obligations, this is through no fault of the teachers, yet they are the ones who must pay the price. Government intervention and regulation of such plans has been limited at best, and as of now there are very few measures of legal recourse available to individuals caught in these positions, and these provisions are themselves rather toothless and ineffective (McElroy 2006).

This state of affairs continues to arise in many districts and regions despite assurances that defined benefits are "secure" (Schalger 2008). The type of "security" offered by these pension and retirement plans makes it ever more important for the individuals that depend on them to increase their own contributions to their retirment funds, and to take steps to ensure that they will be covered for healthcare by Medicare and other available programs, both government-operated and private. Such financial planning should always have been a part of teachers' and professors' salaried working years, but it was often neglected due to the perceived strength of the institution or school system for which these individuals worked (Schlager 2008). This strength has obviously diminished.

As a direct result of the problems perceived with retirement benefits, including both pension payments and healthcare benefits, many teachers are trying to remain employed longer just to hold on to the benefits and salaries that they still have, prolonging their healthcare coverage and attempting to correct for what turned out to be their misconceptions regarding the security of their pension plans (June 2006). The growing number of retirees is itself an issue, as the baby boomer generations start leaving the workforce and attempting to collect their lucrative benefits while the overall workforce and capabilities of continuing to pay these benefits is diminishing (June 2006). Much of the problem currently facing these individuals and institutions, then, is purely mathematical, but the understanding of the problem as such does not exactly reduce the burden it creates.

It has also been suggested that in the educational industry, if it can be appropriately termed as such, "the cost of retirement benefits for teachers is higher than for private-sector professionals (Costrell & Podgursky 2009, pp. 59). The inability to keep up with pension and healthcare benefit payments is, according to some, the natural result of a lack of foresight regarding the issue (Costrell & Podgursky 2009). Emeriti Retirement Health Solutions is a recently formed non-profit defined benefits program that attempts to address this issue by providing future planning of both costs and funding of benefits, adjusting its offered benefits based on actual projections (June 2006). For many retired or retiring teachers and professors, however, this program and the possibilities of others like it have come too late, and have provided too little.

Problems for Districts and States

It is not only the teachers and the institutions struggling to pay them that are finding themselves short of the funds -- or the benefits that these funds are supposed to provide -- but the states and school districts that fund these institutions are also finding themselves strapped for cash and unable to meet their obligations. In Alabama, issues resulting from rising costs for pension and health care benefits are being further exacerbated by current and expected future cuts to education funding; the state simply does not have enough money to go around and all programs, including educational programs and teacher's benefits packages, are suffering (Cook 2009). Soon, according to some insiders on the issue, the state may have "to ask the state's education employees to kick up more of their own money per month to pay for health insurance and retirement benefits" (Cook 2009). Though Alabama is experiencing some of the worst financial woes in this area, it is far from alone in experiencing these problems.

Several years ago, the Los Angeles school district was forced to reappraise the expected costs of its retiree healthcare benefits, an especially lucrative package negotiated by the teachers' union, from five billion to at least ten billion dollars due to the significant rises in healthcare costs and increasing numbers of retiring teachers, all of which is "bad news for taxpayers who will foot the bill and for children whose education will be limited by the cost" (USA Today 2006). Again, a lack of foresight and ongoing oversight allowed the significantly lower estimate to remain in place for some time, but new federal regulations enacted in the preceding year brought the issue heavily to light (USA Today 2006). Other districts are almost certain to face similar adjustments, and the changes are likely to be even more severe during these years of overall economic decline and healthcare volatility than they were even four seemingly short years ago, creating larger deficits and inabilities to meet obligations.