Pictured above is a group of retired teachers celebrating in Georgia after they blocked efforts to change the automatic rate of increase in their pension benefits. According to the Atlanta Journal Constitution, since 1969 teachers in Georgia have enjoyed twice-annual automatic increases of 1.5% in their pension benefits. After losing $11 billion since July 1 in the $41 billion pension fund, Governor Sonny Perdue floated the idea that the rate of increase might need to vary depending on economic conditions. No dice, said outraged teachers. We paid in and are entitled to that money.
Never mind that because teacher pensions are usually defined benefit plans, the amount they receive can be substantially more than what they paid in plus the return on that money. This is especially true when the returns on investments have been lousy, as has been the case recently. And if the pension funds come up short the taxpayer is on the hook to pay the benefits. The angry teachers don’t care. Gimme!
And politicians have incentives to promise too much in pension benefits because of electoral threats from teacher unions. The AJC piece nicely documents the electoral pressure: “Steve Jackson, 62, a retired Villa Rica social studies teacher, held a sign at the entrance of the Retirement System Offices. It read ‘betrayal’ and ‘teachers never forget.’ ‘We feel like Sonny (Perdue) wouldn’t be governor without the teachers support,’ Jackson said. ‘He promised things to the teachers. We feel very betrayed.’”
Notice that Jackson is retired for we don’t know how long at the age of 62. In fact, teachers in most states can retire with full benefits in their mid-fifties. In Missouri, for example, a teacher can retire in her mid-fifties with 30 years of experience and receive 75% of her highest three years of salary (plus increases for inflation) for the remainder of her life. And since a woman at the age of 55 can expect to live another 28 years, she can expect to receive pension benefits for about as many years as she worked.
Meanwhile, the rest of us have to work longer before retiring, both to compensate for losses we may have experience in our defined contribution plans and to pay the taxes to bail out the excessive promises made to teachers. Just picture this: there are people who will have to work well into their seventies to pay for teachers who retire in their mid-fifties.