School districts grapple with looming fiscal crisis

Monday, June 10, 2013

A new report by the Thomas B. Fordham Institute, a conservative education policy think tank, looks at three school districts – Milwaukee Public Schools, the Cleveland Metropolitan School District and the School District of Philadelphia – to see how prepared, or ill-prepared, they are to deal with making good on their financial promises.

The research found large differences in what the impact of retirements would be on school districts’ budgets over the next decade, which reflects a larger pattern of variation across states. Even Milwaukee, the district with the best projections, faces large costs. The paper also highlights a problematic truth of these guaranteed retiree benefits: someone must pay for them, whether it’s school districts, taxpayers or younger teachers.

Pension and retiree health care benefits are a staple of teachers union demands. Throughout a teacher’s career, the employer pays into a pension fund. In some places, the teacher doesn’t need to make any contributions. After retiring, teachers receive pension payments that are based on their years of service and final salary and which are often adjusted for inflation. Because many teachers retire in their 50s, before being eligible for Medicare, unions have also negotiated for school districts to cover the health care of retirees.

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