How Well Do Teacher Pension Plans Serve Charter and Urban Teachers?
Cory Koedel Shawn Ni Michael Podgursky P. Brett Xiang Department of Economics University of Missouri - Columbia
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Prepared for the 7th Annual CALDER conference. Washington DC , Jan. 23-24, 2014 Views reflect those of the researchers. The usual disclaimers apply.
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St. Louis Superintendent Kelvin Adams said rising pension costs are part of the overall budget constraints forcing the closure of two schools next fall — Sherman Elementary and L’Ouverture Middle. The district’s pension obligations, Sullivan said at the forum, “cannot be used to educate students. It cannot be used to pay teachers. The money cannot go into the classroom where many think it should be invested.”
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Note: Employer ARC for PSRSSTL. 2010 = 8.27%, 2014 = 16.5%
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Some charter school leaders point out that most of their staffs will never even draw a pension. Teachers at charter schools tend to be younger, work for less pay, and switch jobs at a much faster rate than those at St. Louis Public Schools. Based on historical data, half of teachers at charter schools will leave after one year, according to the pension system’s annual report. Just one out of three will remain in the system after three years. Becoming vested requires five years of employment.
So Principal Lynne Glickert began recruiting a candidate from St. Louis County, a teacher whom she calls “amazing.” But the teacher turned the job down. The reason: To work at Grand Center Arts Academy, a charter school, she’d have to switch to the city teachers’ pension system. “I wish they had a choice,” said Glickert, who has run into this predicament before. “For her, it’s about the retirement.”
Overview
• National context • Missouri Institutional Context • Incentives in DB Plans • Benefits and Costs for Charter Schools versus
Traditional Schools • Conclusions
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Note: excludes retiree health insurance & Employee contributions
Source: Costrell and Podgursky (2009), updated at http://www.uaedreform.org/downloads/2013/12/quarterly-employer-contribution-chart-update.pdf
Missouri Situation
• 3 Systems and No Reciprocity • Kansas City PSRS (3% of MO teachers)
– Teachers and staff – In Social Security
• State PSRS (93% of MO teachers) – Teachers, not in SS
• STL PSRS (4% of MO teachers) – Teachers and staff, in SS
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Year 2002 2007 2012
KC Traditional 2,213 2,118 1,125 KC Charter 353 445 771 KC Total 2,566 2,563 1,896 Index 100.0 99.9 73.9 Charter % 13.8% 17.4% 40.7%
STL Traditional 3,155 2,502 1,934 STL Charter 115 282 835 STL Total 3,270 2,784 2,769 Index 100.0 85.1 84.7 Charter % 3.5% 10.1% 30.2%
PSRS 61,008 64,218 64,124 Index 100.0 105.3 105.1
Teacher Employment Trends
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Year 2002 2007 2012
KC Traditional 2,213 2,118 1,125 KC Charter 353 445 771 KC Total 2,566 2,563 1,896 Index 100.0 99.9 73.9 Charter % 13.8% 17.4% 40.7%
STL Traditional 3,155 2,502 1,934 STL Charter 115 282 835 STL Total 3,270 2,784 2,769 Index 100.0 85.1 84.7 Charter % 3.5% 10.1% 30.2%
PSRS 61,008 64,218 64,124 Index 100.0 105.3 105.1
Teacher Employment Trends
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8.0%
16.5% 14.5%
8.0%
5.0%
14.5% 12.4%
12.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
KC STL PSRS
Social Security
Teacher
Employer
28.4%
33.9%
29.0%
2014 Retirement Pension Contribution Rate in Three Missouri Teacher Pensions Plans
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Per
cen
tage
Con
trib
uti
on
Retirement Pension Costs as a Percentage of Salary for PSRS, Saint Louis, and Kansas City
PSRS
STL
KC
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• Significant enhancements to all three plans during 1990’s.
• These contribute to legacy costs (UAL) – KC: 1993 formula multiplier = 1.5%
• 1999 = 2.0%
– STL: 1999: formula multiplier raised from 1.25% to 2%
– All Retroactive
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Annual Pension = S x FAS x r(S,A) S = service years FAS = final average salary r(S,A) = replacement factor
Typical Final Average Salary DB teacher pension
Age and /or service criteria for regular retirement
Note: No link to contributions
KC Missouri PSRS STL
Number of Teachers 1896 64124 2778
Share of MO Teachers (%) 2.7% 93.4% 3.9%
In Social Security Yes No Yes
Vesting (years) 5 5 0
Retirement Eligibility 60/5, Rule of 75 60/5, any/30, Rule of 80 65/5, Rule of 85
Contribution Rates Teacher 7.5%, District 7.5%
Teacher 14.5%, District 14.5% Teacher 5.0%, District 11.1%
Multiplier 2.00% 2.5% 1-30 yrs, 1.55% 31+ yrs 2.00%
Early Retirement 55/5 55/5, any/25 60/5
COLA ad hoc CPI, compounded, up to 80% ad hoc
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Cash Annuity
Pension Wealth
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0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
24 29 34 39 44 49 54 59 64 69 74
PDV
of P
ensi
on W
ealth
($20
13)
Age
Pension Wealth Accrual for Representative Kansas City Teacher in all Three Missouri Systems
Kansas City
PSRS
St. Louis
18
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
24 29 34 39 44 49 54 59 64 69 74
PDV
of P
ensi
on W
ealth
($20
13)
Age
Pension Wealth Accrual for Representative Kansas City Teacher in all Three Missouri Systems
KansasCity
PSRS
St. Louis
Pull
19
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
24 29 34 39 44 49 54 59 64 69 74
PDV
of P
ensi
on W
ealth
($20
13)
Age
Pension Wealth Accrual for Representative Kansas City Teacher in all Three Missouri Systems
KansasCity
PSRS
St. Louis
Push
20
1993 2002 2007 Mean Experience
27.1 27.6 26.4
Median Experience
28
29
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Mean Age 58.7 55.7 56.5 Median Age 59 55 56
N 875 1612 1648
Experience and Age of Teacher Retirees: 1993, 2002, and 2007 (Missouri )
Trend toward later retirement in other sectors and other industrial nations: Gendell ( 2008) Burtless, (2008)
Source: Ni, Podgursky, Ehlert, 2009
• What is the probability a new teacher makes it to the top of the hill?
• In STL and KC (charter or non-charter) – very low
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PSRS
STL and KC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 1 2 3 4 5 6 7 8Years Experience
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012
PSRSKC CharterSTL CharterSTL TraditionalKC Traditional
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PSRS
STL
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 1 2 3 4 5 6 7 8Years Experience
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012
PSRS
STL Charter
STL Traditional
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PSRS
KC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 1 2 3 4 5 6 7 8Years Experience
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012
PSRS
KC Charter
KC Traditional
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PSRS
STL and KC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 1 2 3 4 5 6 7 8Years Experience
Plan Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012
PSRSKC CharterSTL CharterSTL TraditionalKC Traditional
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0 1 2 3 4 5 6 7 8Years Experience
Retention of New Teacher Hires: Cohorts of New Teachers Hired Fall 2005 - Fall 2012
PSRS
KC Charter
STL Charter
STL Traditional
KC Traditional
RG and Normandy
PSRS
RG & Normandy
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0
100000
200000
300000
400000
500000
600000
700000
800000
24 29 34 39 44 49 54 59 64
PDV
of P
ensi
on W
ealth
($20
13)
Age
Pension Wealth Accrual for Representative Kansas City Teacher and Estimated Probably of Retention to Given Age
Kansas CityPension Wealth
KC CharterRetention
KC Trad.Retention Re
tent
ion
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0
100000
200000
300000
400000
500000
600000
700000
24 29 34 39 44 49 54 59 64
PDV
of P
ensi
on W
ealth
($20
13)
Age
Pension Wealth Accrual for Representative Saint Louis Teacher and Estimated Probably of Retention to Given Age
Saint Louis Pension Wealth
STL Charter Retention
STL Trad. Retention Rete
ntio
n
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$54,316 $53,416
$318,061
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Kansas City Traditional Teacher Kansas City Charter School Teacher Hypothetical PSRS Teacher
Expe
cted
Pen
sion
Wea
lth in
201
2 Do
llars
Expected Pension Wealth in Kansas City, Discounted to Age 55 for Teachers with Different Expected Survival Rates
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Expected Pension Wealth in Saint Louis, Discounted to Age 55 for Teachers with Different Expected Survival Probabilities
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 1 2 3 4 5 6 7 8
Proo
port
ion
Estimated Survival Probabilities for New Teachers: 2004-05 SASS Teacher Follow Up Survey
Low Poverty
High Poverty
Charter School
Conclusion • More general research agenda. Do results
generalize to: – Charters in other states? – Cohorts of new urban teachers in other states? – Other school reform strategies?
• TFA • High quality alternate route programs (TNTP)
• Retirement security: DB/DC/CB
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