Retirement benefits can be a game changer when it comes to the career or job a person chooses.  Considering the high stakes involved in retirement pay and pension plans, it makes sense that teachers are up in arms about the rising cost of state pensions.  In fact, teachers in Colorado have walked off the job, causing schools to close. Teachers are protesting (at the state Capitol in Denver) for higher pay, to offset the impending government budget cuts that would result in a reduction in retirement pay (as well as a cut in take-home pay).

Budget Cuts for Public Schools

Budget cuts for public schools have totaled $6.6 billion since 2009, according to a recent U.S. News and World report.  One of the reasons pay is dwindling for teachers in Colorado (and other U.S. States) is due to the rising cost in state pensions. 

Underfunded retirement systems have resulted in at least 20 different school district educators walking out of their classroom last month. Colorado’s pension is among the worst funded in America.

Record debt levels exist in public pension systems across the nation, totaling $1.4 trillion, says a recent study conducted by Pew Charitable Trusts. Rising pension costs may be a factor behind the scenes for cuts in health care, pay and other benefits in many states, including Arizona, where a statewide strike closed schools for 4 days.

“I think what you see happening in the state, local and municipal sector is it has now become very clear how expensive defined benefit plans are. I think we’re headed for a big crisis across the country,” said Olivia Mitchell, executive director of the Pension Research Council at the University of Pennsylvania. “Pensions are now becoming the tail that wags the government dog, if you will.”

The Rising Cost of State Pensions

In Colorado, the school district payments to the public pension fund have grown nearly twofold since 2006, from approximately 10% to nearly 20% of payroll, says U.S. News.

In addition, teacher salaries have increased by 21% from approximately $44,439 to $53,768.  These statistics were reported from the National Education Association.  But, in the Denver area, inflation has risen at a faster pace than teacher’s salary raises can keep up with, says the Bureau of Labor Statistics. Freezing pay, cutting programs and reducing the school schedule to only 4 days per week, are a few examples of attempts of Colorado school districts to manage the budget cuts. 

A national study conducted by Bellwether Education Partners in 2016, found that $14 of every $20 that school districts pay into the pension fund for each teacher, ends up going to pay off debt; the result is that only $6 goes into the worker’s retirement fund.  What that means is that teachers who are currently working, are paying for their predecessors’ retirement.  In Colorado, the picture is more dismal, with only $3 of every $20 spent per educator going to their retirement fund.
Public Workers and Social Security Benefits

Cutting retirement pay for public school teachers is controversial.  For one reason, public employees in Colorado do NOT receive Social Security checks; this means that budget cuts to their regular cost of living raises could leave teachers in a very bad financial situation–at the time of retirement (due to inflation).

“The costs of those debts are likely to get worse before they get better,” says U.S. News and World Report. Many school districts’ pensions are among the worst funded in the country, and government officials are currently considering several solutions to “shore it up.”