Benefit or Burden? On the Intergenerational Inequity of Teacher Pension Plans

Most public school teachers in the United States are enrolled in defined benefit (DB) pension plans. Using administrative micro data from four states, combined with national pension funding data, we show these plans have accumulated substantial unfunded liabilities – effectively debt – owing to previous plan operations. On average across state plans, over 10 percent of current teachers’ earnings are being set aside to pay for previously-accrued pension liabilities. This amounts to a large reduction in real operating spending per student. Our findings make clear that a significant fraction of the resources allocated toward teacher compensation in current public education budgets is not being invested in resources to educate today’s students at all.

August 2016 Update; Originally posted November 2015