Equable’s report on Hidden Education Funding Cuts covers a lot of public policy topics, including public pension finances and education spending trends. To dive deeper on some of these topics we have put together a list of additional resources that may be of interest. If you have other resources on these topics, please feel free to send links and comments to [email protected].
Topics on this page:
- We think state spending data shows pension costs are eating up a larger share of education resources. Who else is seeing the same trend?
- Has education funding nationally really stagnated since the Great Recession? How has the trend changed in recent years?
- What about teacher salary trends, are they stagnating too? How do they compare against trends in education funding?
- How are hidden education funding cuts from pension costs exacerbating inequities in spending and outcomes?
- What are the best sources for understanding why there is a roughly $645 billion shortfall in funding for teacher pensions nationally?
We think state spending data shows pension costs are eating up a larger share of education resources. Who else is seeing the same trend?
- Sarah Anzia (U.C. Berkeley) has looked at the trends in local government pension costs, revenue collections, employment rates, and capital outlays from 2005 through 2016.She found that while the cost of pensions was rising, there were no corresponding increases in tax collections. Moreover, during that same time period there were reductions in the government workforce and capital outlays, suggesting that pension costs are crowding out other elements of local government budgets (in technical terms, her modeling shows a statistically significant relationship).
- Pivot Learning examined school district data across California and discovered rising teacher pension costs were directly responsible for decisions to cut enrichment programs, increase class sizes, and defer maintenance. In other words, California’s rising teacher pension costs have been reducing efforts to improve educational equity across racial and socioeconomic lines. This analysis stems from both school expenditure reports as well as survey data of school board members from across the state.
- Carrie Hahnel argues in an article for The Opportunity Institute that California’s current approach to addressing teacher pension debt is exacerbating school district inequities.
- Bellwether Education Partners has shown using a 50-state analysis that spending on education staff benefits has grown at a faster rate than overall K–12 spending.
- National Council on Teacher Quality analysis from 2017 claimed “States have tightened retirement benefits for new teachers, and school districts have found themselves hamstrung, unable to raise salaries and increasingly diverting more of their overall budgets to pension costs.”
- The Hechinger Report published data in 2019 concluding that rising teacher pension costs are hurting school districts, and by extension their students.
- Josh McGee found in a 2016 Manhattan Institute report that “retirement costs costs per pupil are already approaching 10% of all education expenditures.” He documented a number of specific ways that teacher pension debt has could be crowding out education spending at the state and local level:
- Per-pupil spending on equipment, facilities, and property fell by 26% between 2000 and 2013, likely resulting in a growing backlog of expensive repairs and replacements that will need to be made sometime down the road.
- Spending on instructional supplies (e.g., textbooks) declined by 10% per pupil. More than half of states (29) spent less per pupil on instructional supplies in 2013 than in 2000; in several states, the decline was substantial: Arizona (37%), California (30%), Michigan (39%), and Oklahoma (30%).
- Teachers’ salaries overall were basically flat between 2000 and 2013, and retirement benefits were reduced in almost every state, sometimes by very large amounts.
- The National Association of State Retirement Administrators (NASRA) periodically offers analysis of trends in state and local government spending as they relate to public employee retirement systems. While NASRA is clear that they do not believe the amount being contributed to pensions is a danger to broader state fiscal health and sustainability, they do find clear trends of pension costs consuming an increasing share of available government resources — a trend that is even more evident when examined relative to K–12 funding.
- A December 2019 brief examines fiscal 2017 spending by state and local governments and documents that state and local spending on public pensions has reached 4.7% of all “government direct general spending.” Moreover, as Figure 2 of the update illustrates, the share has climbed steadily from a low of 2.3% in 2001 (when plans were last fully funded) to a projected 5.0% in 2018.
- Another June 2019 brief on contributions to statewide pension plans also documents the growth in contributions, explaining: “Depending on the plan, the growth of required employer contributions is due to one or more factors, including investment market losses; insufficient contributions; more conservative actuarial methods and assumptions, including lower investment return assumptions and more aggressive amortization periods; and demographic and investment experience that differs from assumptions.”
Has education funding nationally really stagnated since the Great Recession? How has the trend changed in recent years?
- Equable’s review of NASBO data found that from 2001 to 2018:
- The average increase in education funding from state legislatures was just 2% a year among the 44 states that did up their spending; six states, plus DC, spent less in 2018 than 2001, adjusted for inflation.
- While it appeared that state spending on education increased 78%, the actual (inflation adjusted change) was just 26%.
- While it appeared that the per pupil dollars sent to school districts from state governments went up 67%, the inflation adjusted increase was only 18%.
- Center on Budget and Policy Priorities review of Census data since the Great Recession found:
- 29 states “provided less overall state funding per student in the 2015 school year (the most recent year available) than in the 2008 school year, before the recession took hold.”
- 19 states had “local government funding per student” decline from 2008 to 2015, “adding to the damage from state funding cuts. In states where local funding rose, those increases usually did not make up for cuts in state support.”
- The Pew Charitable Trusts found that state funding for K–12 education in 2016 was down in 29 states when compared against 2008.
- On a per pupil basis spending “stood at $6,745 nationally, below 2008 levels by about 1.7 percent, or nearly $120 per pupil, after adjusting for inflation.”
- Moreover, “State support per pupil was lower in a majority of states—29—in academic year 2016 compared with 2008, according to the most recent available data, and was down at least 10 percent in nine of those states. Initial data for 2017 and 2018 show that more than 20 states continued to provide less per-pupil funding than at the start of the recession.”
- All major education spending and revenue data sources show the same trend of slow or stagnant growth in inflation adjusted figures, even if the headline dollar amounts are slightly different. For example, see data from NASBO, Census Bureau, and NCES.
What about teacher salary trends, are they stagnating too?
- National Education Association data point to an overall decline in inflation adjusted teacher salaries since 2000. Here are visual breakdowns of data from EdSurge.
- National Center for Education Statistics says that the average salary for U.S. teachers in the 2016-17 school year was 2% lower than the 1990-91 school year, adjusting for inflation.
- While there is only a correlation between increasing pension costs and stagnating teacher salary costs, it is not hard to imagine that if states hadn’t spent $36.3 billion in unfunded liability amortization payments to try and close their pension funding shortfalls in 2018, that a large portion of that money could have been made available for salary increases.
How are hidden education funding cuts from pension costs exacerbating inequities in spending and outcomes?
- In their report Getting Down to Facts II, Christopher Edley, Jr. and Hayin Kimner reviewed “a common evidence base for understanding the current state of California school systems” and found the following:
- “Pension debt will have major equity implications in the short and long term as pension obligations affect district solvency, funding adequacy, and the teacher labor market.”
- “Districts already anticipate that ballooning pension costs will outpace revenue and lead to budget cuts likely to affect classroom level spending.”
- No funding formula can address issues of equity realistically and practically until we address some intractable structural deficits that face our education system, including pensions (see Krausen & Willis, 2018).”
- In Illinois, “pension funding is yet another way in which states and districts invest fewer resources in the education of low-income students and students of color,” says Max Marchitello in analysis for Bellwether Education Partners. His conclusion, based on 10 years of school funding and demographic data in Illinois, points to pension spending increasing “existing poverty-based inequities by over 200 percent, and race-based inequities by over 250 percent.”
- In Maryland, “teacher pension spending compounds school finance inequities” according to another analysis from Marchitello. In this article published by TeacherPensions.org, he shows pension spending increasing inequities between Baltimore City and the wealthier Baltimore County.
What are the best sources for understanding why there is a roughly $645 billion shortfall in funding for teacher pensions nationally? (And why state governments are reporting a $1.4 trillion shortfall for all public sector pensions combined.)
- The Pension Basics Series — from Equable
- Why Does Funded Status Matter — from Equable
- “Hidden Debt, Hidden Deficits: 2019 Update” — Josh Rauh, Stanford University
- “A Tangled Web of Factors Causing Inappropriate Pension Funding Behavior” — Anthony Randazzo (2017), The Journal of Law, Economics & Policy
- “The Coming Pension Crisis is So Big That It’s a Problem for Everyone” — John Mauldin (2019), Forbes
- “How to Avert a Public-Pension Crisis,” — Josh McGee (2019), National Affairs
- “The Long Bull Market has Failed to Fix Public Pensions: Sums Owed to Retirees are Accelerating Faster than Assets on Hand to Pay Those Future Obligations” — Heather Gillers (2019), The Wall Street Journal.