An easy solution to the teacher shortage

Robert Fellner

There’s an easy way for any state to solve its teacher shortage: stop forcing them to pay for other people’s retirement, and use those savings to provide an across-the-board pay raise instead.

Take the case of Nevada, for example, where a state emergency was declared after the Clark County School District (CCSD) — the nation’s fifth largest — found itself short several hundred teachers earlier this year.

The main culprit was almost certainly the unappealing salaries, like the only $34,684 offered to new teachers.

After cutting several planned maintenance and upgrade projects, CCSD was able to boost that number to $40,900 last month. But depleting funds from an already strained budget is not a viable long-term solution.

Instead, CCSD could boost teacher pay, at no extra cost, if lawmakers allowed it to modernize its retirement system — the Public Employees’ Retirement System of Nevada (PERS).

While CCSD pays PERS directly, teachers pay their share through salary reductions.

Consequently, as PERS costs skyrocketed — up over 36 percent since 2007 — to today’s all-time highs, CCSD was unable to raise salaries as much as they, and teachers, would like.

What’s most frustrating about this rate hike, however, is that it provides no additional benefit to the current teacher paying it. Instead, almost all is spent on paying down PERS debt — a function of a system which was designed to transfer the cost for the previous generation onto present-day teachers and taxpayers.

In other words, current teachers are receiving lower wages to pay for PERS past funding failures.

Unfortunately, a similar narrative is playing out in teachers’ retirement systems nationwide, which “may exacerbate [the] problems of teacher recruitment and retention,” according to a just-published study by scholars at the American Institutes for Research, the University of Missouri and the University of Washington.

Nationally, schools are spending an amount equal to nearly 11 percent of teacher earnings just on pension debt, which benefits neither the teacher nor employer paying it.

Beyond draining resources that could otherwise be used to increase teacher pay, this “pension tax” is so substantial that the total cost spent on an employee’s future pension surpasses its value, regardless of how long an employee works. Consequently, any new hire “would always be a net loser in the pension system” — meaning they will receive a retirement benefit worth less than its total cost.

Nevada provides a clear example of why this is, as over 40 percent of what today’s teachers may think they are paying for their own, future pension goes towards PERS multi-billion dollar deficit, instead.

Making that profitable would be like an investor showing a positive return after losing 40 cents of every dollar before making a single trade, which is essentially what is happening to the retirement contributions of all Nevada teachers.

The status quo isn’t just unfair; it’s also a terrible way to attract prospective talent.

In fact, when the left-leaning Urban Institute graded all 50 states’ teacher retirement systems, 27 received an “F” for “rewarding younger workers,” while only 2 states earned an “A” — Alaska and Rhode Island — both of which had previously enacted significant pension reforms.

Scholars with the Brookings Institution concurred, declaring that “it is obvious that the current situation is…undesirable in terms of recruiting and retaining the best public employees.”

Obviously, this has to end. Teachers deserve to be fairly compensated, not penalized to bail out lawmakers’ past mistakes.

Even more troubling than that inequity, however, is the potential harm to students.

Experts universally cite teacher-quality as the single greatest determinant on student learning and, subsequently, that child’s long term well-being.

Yet, it is simply not possible to produce a high-quality teaching workforce with today’s inefficient and counterproductive compensation system.

Often discussed in abstract terms of long-run financial costs, these findings illustrate that the public pension crisis is doing real damage, and it’s doing it right now.

Thankfully, there are a variety of viable pension reform solutions available, with Utah and Arizona’s recent experiences providing some of the best roadmaps.

Sensible pension reform of this type would not only allow Nevada to pay its teachers fairly but, most importantly, ensure that all students are greeted by the highly skilled educator they deserve, not an empty chair.

This commentary was originally published in the Washington Examiner.

Robert Fellner

Robert Fellner

Director of Policy

Robert Fellner is NPRI’s policy director and joined the Institute in December 2013. Robert has written extensively on the issue of transparency in government. He has also conducted legal research and assisted in crafting legal arguments for numerous public records-related lawsuits, including one which prevailed at the Nevada Supreme Court, resulting in a landmark decision that protected and expanded Nevadans’ rights to access and inspect government records.

An expert on government compensation and its impact on taxes, Robert has authored multiple studies on public pay and pensions. He has been published in Business Insider, Forbes.com, the Las Vegas Review Journal, the Los Angeles Times, RealClearPolicy.com, the San Diego Union-Tribune, the Wall Street Journal, ZeroHedge.com and elsewhere.

Robert has lived in Las Vegas since 2005 when he moved to Nevada to become a professional poker player. Robert has had a remarkably successfully poker career including two top 10 World Series of Poker finishes and being ranked #1 in the world at 10/20 Pot-Limit Omaha cash games.

Additionally, his economic analysis on the minimum wage won first place in a 2011 George Mason University essay contest. He also independently organized a successful grassroots media and fundraising effort for a 2012 presidential candidate, before joining the campaign in an official capacity.