By Trudy Stephenson Willis
CTA and its education allies are sounding the alarm about a newly proposed state constitutional amendment that would create a divisive two-tiered retirement system for teachers, undermine the present system and limit employer contributions to retirement savings.
Introduced by Assembly Member Keith Richman (R-Northridge), a candidate for state treasurer in 2006, Assembly Constitutional Amendment 23 would institute a pension privatization plan similar to the scheme President Bush is pushing for Social Security. It would require teachers hired after July 1, 2007, to enroll in either a defined contribution plan with no guaranteed benefits or a hybrid plan that would combine elements of defined benefit and defined contribution plans, but still significantly reduce guaranteed benefits. It would also sharply reduce employer contributions to teachers' retirement savings.
In a defined benefit program as provided under the current State Teachers' Retirement System (STRS), benefits are specified by the program and are not based on the accumulated contributions to the member's account. With a defined contribution plan, on the other hand, "there are no guarantees," says CTA President Barbara E. Kerr. "The teacher accepts all the risks."
STRS currently spreads the financial risk among all plan participants, making it possible for teachers to have a safe, secure retirement. Allowing new employees to opt out of the plan would destabilize STRS for current members and expose future teacher retirement plans to market risk.
Teachers are in the business of teaching," says Kerr. "They do not want to be brokers or investment analysts. They don't want to worry about individual investments and hidden fees. With their money in the hands of STRS professionals who do not have an interest in making a profit for themselves, they know their future is safe. The current plan's established, successful program gives teachers a sense of security and peace of mind in their retirement years."
An employee would not be able to retire under the proposed plan, except in the case of disability, until he or she has attained normal retirement age, which is redefined as 65. Participants retiring early would have to wait until they're 65 to collect benefits. In addition, benefits would be considerably lower than for current retirees. It's estimated that a plan participant who begins teaching at age 30 and retires at 65 would get $16,000 less a year. Currently, the average teacher retires at age 61 with 27 years of service and receives a retirement allowance of approximately $3,600 per month. STRS members do not participate in the Social Security system.
California needs to replace nearly 60,000 teachers in the next five years, and more than 100,000 teachers in the next 10 years, says Kerr. "Taking away the defined benefit plan will make the teaching profession less attractive at a time when California should be doing more to attract teachers into the classroom, not less."
I understand that pension liabilities are growing and represent a problem for our state and for school districts, but this is a problem that deserves more thoughtful, comprehensive consideration and should not be solved simply by pulling the rug out from under our teachers, particularly now," said State Superintendent of Public Instruction Jack O'Connell in a news release issued jointly with CTA, the California Federation of Teachers, and California State Treasurer Phil Angelides.
"California simply cannot afford to send this negative message to teachers when we have an urgent need to attract top talent to our classrooms. The need is particularly acute in fields like math and science where private sector salaries and benefits far outweigh those our teachers earn." The measure has to get a two-thirds vote of approval in the Legislature. If it does, it will then go to the voters on the June ballot.
Last February, the STRS Board voted 10-2 against Governor Schwarzenegger's plan to privatize the state's public pension plans, and replace them with individual 401(k)-style private accounts. The governor retaliated by removing four of his appointees.
In December, the STRS Board voted to oppose the current proposal even though five members — including the four latest gubernatorial appointees — abstained.
