David Crane, a businessman who advised former Gov. Arnold Schwarzenegger on financial matters – particularly long-term public pension deficits – recently wrote an I-told-you-so piece for the Bloomberg news service about the State Teachers Retirement System.
He and others had postulated last year that if voters approved the sales and income tax hike being sought by Gov. Jerry Brown, they would see the money disappear into CalSTRS, rather than into classroom instruction, as Brown, et al., insisted.
CalSTRS is now seeking $4.5 billion a year in additional funds from someone – the state, local school districts or teachers themselves – to cover its projected pension obligations.
And as Crane points out, the $4.5 billion assumes that the trust fund can meet its "unrealistically high investment return assumption that implicitly forecasts the stock market to double every 10 years..."
The CalSTRS deficit is not new. Capitol politicians have been talking about it – but not doing anything about it – for several years.
Wednesday, May 01, 2013
I'm Screwed
From the major Sacramento newspaper:
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9 comments:
The MARKET to double every 10 years? Or return on investment to double every ten years? One is reasonable ... not the other, so much.
Quite possibly and I write that with no joy.
The public sector pension catastrophe is looming and there doesn't seem to be anything to do about. About the only hope I can hold out is that continually-improving productivity generated by free enterprise will simultaneously reduce the cost of living while increasing societal wealth to the point that the blow, when it falls, will be considerably softened from what it looks to be right now.
Darren,
It's really disturbing how politicians and bureaucrats blithely rob the pension system while unions are complicit as they rob us by stealing union dues from us against our wills.
allen . . . you're right about it being a catastrophe- but social security is, just as much ... and we neither pay into nor receive that. If you want to argue that it's unfair that we negotiated a better deal than non-public employees, I would agree ... but then again, I would argue that we also get salaries that are below what a similarly trained, important professional would make in the marketplace. Now, useless state bureaucrats who get similar deals (in a DIFFERENT system) despite the fact that they contribute nothing to society, and in fact may detract from it? I'll join you with pitchfork and torch.
And social security, which was once referred too as "the third rail of American politics" seems to have a distinctly lower voltage to it because it's being talked about all the time and not in a way that would have been possible fifteen or twenty years ago even though it was as clear then as it is now that the system's unsustainable.
Just to maintain the balance of the universe I'll counter-argue that "you" - meaning teachers I suppose - are overpaid. At least for kindergarten through about sixth grade which is where the baby-sitting function starts to give way to the teaching of facts and ideas that are appropriate to an adult.
Referring again to the work of Dr. James Tooley, it's pretty clear that certification requirements are much more about various politically expedient functions, mostly, but not entirely, market exclusion, then educational so that what a teacher who's competent ought to earn isn't all that obvious.
Even referring to the private school market isn't much help since the private school market operates under the shadow of the district-based public education system but isn't controlled directly by the public education system. Thus the private school market has greater freedom to offer teachers what the district-based public education system needn't offer like professional respect.
It's a cinch the private schools don't hire the dregs cast off by the district-based public education system since that entity has no particular reason to cast off lousy teachers and private schools have a strong incentive not to hire those dregs.
Lastly, in the district-based public education system teachers are in competition with non-teaching professionals for payroll bucks. Detroit Public Schools has, or used to have, a superintendent in charge of safe, clean and healthy schools. A superintendent. And staff. And offices. And et cetera. Could the money that was pissed away on that sort of idiotic, bureaucratic excrescence have been put to better use? Yeah, I think it could have been and one possible, although not certain, expenditure might have been to raise teacher's salaries.
Yeah. I just got CalStrs quarterly newsletter that essentially said even with the great stock market returns of 2012, their unfunded liability grew. WTF?
Allen-
I don't totally disagree. I've long felt that secondary teachers should form their own, separate union -- the requirements for the job, working conditions, number of students ... all totally different. In our state, they work with a maximum load of 24 or 36 total; secondary work with 165. They must know a little about a lot of things, but not a whole lot about anything. High school teachers are different, too: I would support a contract guaranteeing smaller class sizes for English teachers, and stipends for in-demand teachers, like math and science. Basically ... elementary school teachers need to be able to teach the kids to read, write, do basic computations, and memorize their times tables. And, from what I see? They don't do that. Especially the times tables. The comparison to private schools doesn't work in CA, at least, for a couple of reasons: first, private school teachers are not required to attain a credential; therefore supply is greater and wage is lower. In addition, you get students whose parents are paying essentially double, or more for their child's education. That presents its own set of problems, but you do tend to get better behaved students, hence better working conditions, and, again, a greater supply of labor. Were it up to me? I'd determine at the state level what it should cost to educate a student; set that value exactly equal to what a public school would cost the parent; then issue each parent a check equivalent to that amount, redeemable only at an accredited school. In other words, a non-half-assed voucher program -- a real one. You would be able to afford public school, guaranteed ... but you might only have to pay an extra grand, or even nothing, to go to a better private school. Let the teachers unionize if they wanted to... by school, or statewide. But THAT would be competition.
Allen-
I don't totally disagree. I've long felt that secondary teachers should form their own, separate union -- the requirements for the job, working conditions, number of students ... all totally different. In our state, they work with a maximum load of 24 or 36 total; secondary work with 165. They must know a little about a lot of things, but not a whole lot about anything. High school teachers are different, too: I would support a contract guaranteeing smaller class sizes for English teachers, and stipends for in-demand teachers, like math and science. Basically ... elementary school teachers need to be able to teach the kids to read, write, do basic computations, and memorize their times tables. And, from what I see? They don't do that. Especially the times tables. The comparison to private schools doesn't work in CA, at least, for a couple of reasons: first, private school teachers are not required to attain a credential; therefore supply is greater and wage is lower. In addition, you get students whose parents are paying essentially double, or more for their child's education. That presents its own set of problems, but you do tend to get better behaved students, hence better working conditions, and, again, a greater supply of labor. Were it up to me? I'd determine at the state level what it should cost to educate a student; set that value exactly equal to what a public school would cost the parent; then issue each parent a check equivalent to that amount, redeemable only at an accredited school. In other words, a non-half-assed voucher program -- a real one. You would be able to afford public school, guaranteed ... but you might only have to pay an extra grand, or even nothing, to go to a better private school. Let the teachers unionize if they wanted to... by school, or statewide. But THAT would be competition.
Unfortunately, what you, and I, feel about teacher salaries is irrelevant. The politicians that sit on school boards and in legislatures determine those salaries and they respond to political pressure. Whoever had the greatest clout determined the policy and the teacher's unions, abetted by a widely-held belief that the more you pay for something the better it is, had that clout.
What unions don't have is any incentive to differentiate among their membership on the basis of professional skills. Quite the opposite; a rotten teacher's dues are exactly the same as a great teacher's dues and a borderline baby-sitter/teacher's dues, all other things being equal, are the same as an AP teacher whose grasp of the subject matter would qualify them to teach in college.
Notice how neatly that indifference to teaching skill on the part of the union dovetails with the indifference of the school board to student attainment. There's the glove into which the union hand so neatly fits. Unions don't care if teachers teach and neither do school boards because school boards don't care if students learn.
But we're traveling pretty far afield from the post that started this thread so, yeah Darren, it's distinctly possible that you are screwed.
The strategy, if the inevitably destructive course followed by unions should be dignified with that word, is that when state resources run out expend all available and remaining resources to federalize CalSTRS' obligations.
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