Teacher pension system needs reform

Here’s an easy way to solve Nevada’s 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.

With a starting salary of only $34,684, it’s little wonder that the Clark County School District has been plagued by teacher shortages in recent years.

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

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

While the school district pays the retirement system directly, teachers pay their share through salary reductions.

Consequently, as PERS costs skyrocketed — up nearly 40 percent since 2007 — to today’s all-time highs, district officials were unable to raise salaries as much as they, and teachers, would like.

What’s most frustrating about these rate hikes, however, is that they provide no additional benefit to the teachers paying them, but instead go towards servicing PERS debt — a function of a system designed to transfer the cost for the previous generation onto present-day teachers and taxpayers.

Paying today’s teachers less because of past funding mistakes isn’t just unfair; it’s also an ineffective way to attract quality educators.

This inequity — combined with an incentive structure that penalizes exceptional teachers for working past 30 years — is why scholars at the Brookings Institution concluded that “it is obvious that the current situation is … undesirable in terms of recruiting and retaining the best public employees.”

Scholars at Bellwether Education Partners and the left-leaning Urban Institute concurred, finding that 68 percent of recent and future teachers will lose out under PERS — meaning their future retirement benefit will be worth less than the value of their total contributions.

But that report was based on 2012 data, before two recent rate hikes boosted the PERS contribution rate from 23.75 percent to 28 percent of pay — an increase that went entirely to funding past workers’ pensions. As a result, 40 percent of what today’s teachers may think they are paying for their own, future pension is actually spent on someone else.

At these rates, it’s likely that all teachers will lose out under PERS.

It’s easy to see why, as even the most skilled investor couldn’t overcome losing 40 cents of every dollar invested before making a single trade, which is essentially what is happening to teachers’ retirement contributions.

Ironically, those teachers that the district needs the most — new hires — will fare the worst under the current system, as a 2015 legislative change places them under a reduced PERS tier. In other words, new teachers will receive a smaller pension than those they are required to help pay for.

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

Even more troubling than that unfairness, 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 maintain a high-quality teaching workforce with such an outdated and counterproductive compensation system.

Thankfully, there a variety of way in which PERS can be improved. One option is state Controller Ron Knecht’s proposal, which mirrors the successful reforms recently passed in Arizona and Utah.

Simply by ensuring all expenses benefit the employee paying them, this new PERS tier would enhance teachers’ retirement benefits while simultaneously trimming costs by nearly 35 percent.

Reform of this type would allow teachers to receive a long overdue pay raise and, most importantly, ensure that all students are greeted by the highly skilled educator they deserve, not an empty chair.

Robert Fellner is the director of transparency research at the Nevada Policy Research Institute.