April 08, 2009
In case it wasn't clear that teachers' pensions are about as sustainable as daily print newspapers, New Jersey is here to remind us. The Garden State Teachers' Pension and Annuity Fund, which covers retirement benefits for about 232,000 active educators, retirees, and beneficiaries, is facing a whopping $14.1 billion long-term shortfall. And that was as of June 30, 2008. In the nine months since, the state's retirement investments lost 25 percent of their value. We've long argued (see here and here, too) that the current teacher pension system is both untenable and perversely incentivizes teachers to stick it out after they've checked out (or, conversely, to retire while they still have some fire). There are two main ways to fix this problem: take even more money out of the pockets of today's teachers and taxpayers in order to shore up the system, or bring retirement benefits back down to earth. At a time when private sector employees are seeing their 401(k)s go up in smoke, we think the first strategy will prove as politically popular as the AIG bailout. Isn't it time for Plan B?
"NJ teachers pension fund closer to insolvency," by Jonathan Tamari, Philadelphia Inquirer, April 3, 2009