Study Links Pensions to Teacher Performance

Tuesday, November 01, 2011


With teachers at the center of the pension reform debate in Rhode Island, a new study by the National Institute on Retirement Security (NIRS) credits pensions with improving teacher performance and reducing turnover in school districts across the country.

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The study found that the turnover cost per teacher leaving in Rhode Island is well above the national average of $12,443. A $14,122, only Pennsylvania, New York, New Jersey, Michigan, California, Connecticut and Washington D.C. have more expensive turnover costs per teacher than the Ocean State.

But it also suggests that defined benefit (DB) pension plans “help to recruit high quality teachers, and to retain highly productive teachers longer.” Under the pension reform proposal introduced by Governor Lincoln Chafee and General Treasurer Gina Raimondo, plans for teachers would move to a hybrid system that is more like a 401k.

The plan would force state employees and teachers to contribute 8.75 percent out of each pay check toward their retirement, a .75 decrease in what teachers currently pay. The two groups would contribute 3.75 percent of pay toward a pension, for which vesting requirements have been reduced from 10 years to five years of contributing service. State employees and teachers will also contribute five percent of pay into their own retirement account and the state will contribute an additional one percent to the account.

Report Author: Pensions Save Money

But the benefits to pensions are two-fold, according to Ilana Boivie, the report’s author and an economist with the National Institute on Retirement Security. Bovie said pensions help retain teachers which helps create more effective educators. She said pensions also help reduce turnover in school districts.

“Education policy literature is clear: teachers become more effective as they gain experience,” Boivie said. “Research also shows that DB pension benefits, which provide a modest, reliable income in retirement, are an essential tool for retaining these highly effective teachers.”

Boivie said less turnover helps school districts that are suffering from dwindling budgets.

“Moreover, pensions help reduce the high cost of teacher turnover to school districts and taxpayers,” Boivie said. “These cost savings are a particularly important consideration for state and local policymakers striving to improve education, yet continuing to struggle with highly strained budgets.”

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Union Leader: Decision Makers Need to Weigh All Factors

The report states that because the cost of teacher turnover is substantial, the retention effects of defined benefit pension plans also save school districts money. In 2003, pensions saved school districts $273.2 million nationally in teacher turnover costs, the study estimates.

That’s a key factor that is being overlooked in the current pension reform legislation, according to National Education Association of Rhode Island Government Relations Director Pat Crowley. He said more consideration needs to be given to the potential hidden costs that could come from a massive overhaul of the state’s pension system.

“As this report makes clear, states like Rhode Island need to be aware of all of the potential pitfalls of proposed reforms,” Crowley said. “Decision makers need to weigh all of the factors, including potential hidden costs like skyrocketing turnover rates, before they cast their vote on pension reforms. It's bad enough when people lose their life savings to the unbridled forces of the market - should great schools lose great teachers to the whims of the stock market too?”

Teachers Should Be Fairly Compensated

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Education Commissioner Deborah Gist said salary and benefits do play a role when it comes to education.

“First and foremost, teachers want to have a positive impact on the lives of their students,” Gist said. “To do this, they need to thrive in a supported, professional setting that promotes innovation for teaching and learning. Salary and benefits are certainly part of the equation, and teachers should always be fairly compensated.”

Gist said she hopes the pension reform bill includes an informed debate from both sides.

“We cannot lose sight of the fact that teachers, like most others, are subject to pressures in the greater economy,” she said. “It is my hope that the resolution of issues like pension reform benefit from open and informed debate among all interested parties.”


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