States Slashing Educator Retirement Funds

By Alain Jehlen

Age: 62.
Total retirement fund: $95,000.
Estimated retirement age: Pretty much never.

That was the story for Sandy Gay, a teacher in West Virginia, after the state switched from a “defined benefit” retirement plan that would have given her $2,500 a month, and substituted a “defined contribution” plan that didn’t guarantee any specific retirement income but instead, put money into a risky fund, with Gay bearing all the risk of the gyrating stock market.

And the $95,000 figure was in 2007, before the Great Recession.

Fortunately, the West Virginia legislature came to its senses, restored its retirement system, and let Sandy Gay back in.

But with state revenues and stock indexes down, many states are moving to slash spend on retirement pensions, according to Bill Raabe, NEA’s Director of Collective Bargaining and Member Advocacy.

In 2010, according to NEA research, 17 states made significant changes to their retirement systems, more than in any other year. Almost all of these changes were for the worse:

•    Higher payments from employees;
•    Reduced benefits;
•    Smaller cost-of-living adjustments;
•    More restrictions on early retirement;
•    Shifting pension plans toward “defined contribution” with no guaranteed retirement income, the approach that West Virginia abandoned.

Raabe says media reports have focused on states with badly underfunded pension systems, but the great majority of state pension systems are in good health and don’t need any drastic action.

The ones in trouble, he says, are mostly in states whose legislatures failed to make required contributions to their plan because they thought a soaring stock market would bring in enough money.

But more states are likely to take up pension plan changes this year as the sour economy continues.
“Pensions are shaping up to be the number one compensation challenge facing our state affiliates in the year ahead,” says Raabe.

So what does this mean for most educators?

It means that when the state association organizes a citizens’ lobbying drive to get the legislature to do the right thing, get involved. The pension you save will be your own.

Member activism was the reason West Virginia’s Sandy Gay was able to retire in 2008, on a modest but secure pension, when she was 63.

“For four or five years, I went to talk to every legislator I could find,” she recalls. Gay’s determined lobbying was part of an intense campaign by the West Virginia Education Association. But she didn’t actually think the drive would succeed. “I had given up hope. I thought I would work until I died,” she says.

Today, Gay is enjoying a very busy retirement. Her pension is not lavish but “I don’t need a lot of things. I golf, I visit my grandchildren, I work with the Shriners hospital program for children.” Contacted just after Thanksgiving, she was hard at work organizing a Christmas party for the Shriners children.

“Life is full,” she says.

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  • Richard Young

    Oregon has made huge cuts in pensions of retired state workers. They have made so called “window retiree” teachers repay large amounts which were earned from investing their savings. Now they are cutting promised COLAs back to nearly nothing and cutting the pensions of teachers who have moved out of state by hundreds of dollars per month.
    I had to stop teaching after 35 years because my heart kept beating wildly in varying rhythms and one time stopped completely in the hospital. Fighting these episodes in front of the children just had to stop. So I retired. I can’t promise to be anywhere at any time even with the medication I have to take every day. I can’t get another job to make up the difference in pension paid which is not so great because I didn’t work all those years in Oregon, only most of them. So I can’t go out and get another job to make up for this high percentage of my pension that I have lost. My wife worked at mostly low-paying jobs with no benefits, so we are hurting from both having to pay the window retiree amount and now the subtraction for those who moved out of state. I now live in Washington State near some of my children and their families. I think the legislature has taken the dumb coward’s way out by taxing a bunch of old retired folks, many of them like me who are not very well, in order to balance Oregon’s budget. We qualified for food stamps while working in Oregon at times. The low salary paid to teachers was supposed to be offset by benefits according to contractual agreements between the unions on one side and the school districts and the state on the other. This was apparently a bogus promise.

    How can we get the cruelty of this legislation across to those who might care enough to make their votes in opposition to these legislators count? I have told my family and friends. I know they are concerned. Some have been concerned enough to write to their legislators. I have written to the governor. I do appreciate that the unions are a big part of the coalition challenging this legislation in court, but unless they do more to change public opinion and elect different legislators, we will be right back in court again after another round of pension cuts in the future. For many, many years I paid union dues and even served as a local representative for awhile. Some return on this union investment is due. I do wish that the unions would mount a more successful campaign against cutting earned pensions. I have seen some efforts along this line, but nowhere have I seen the actual hardship stresses that this brings on retired people who often lack the energy and physical resources to fight back. Maybe some of those students we taught will stand up for us if we ask. -That would be a good campaign strategy: ask for past students to stand up for their teachers in this publicity fight which for years has devalued the service of government workers. Will the NEA use their vast resources to support such a campaign? Oh, and I thank the NEA for all the good work that they do for us.
    Another thing that would help is to get the US congress to pass a law prohibiting any state from offering tax incentives to corporations in the future for locating in their state. It just takes tax money away from government services. It doesn’t provide more jobs, only influences where they are located at the expense of taxpayers.

    • Ben Vacca

      NJ has taken away our COLAs entirely and the govenor has refused to fund pensions, even though he authored the law requiring adequate pension funding. He has, however, given tax incentives to businesses, without the promised return of increased jobs for NJ. This is very unsettling, since there is no way for us to make up the difference, should the govenor’s policies bankrupt our pension system. My husband and I moved out of state after retirement to take care of family. We had no choice in the matter. We didn’t work in a well paying school district, because we thought that the poor children we taught needed the best we could give. That also affects the amount of our pensions. This is just blatently wrong!