Keeping the Promise: Kim Crockett Testifies on Minnesota Teacher Pensions
My colleague Kim Crockett testified on Minnesota teacher pensions before the Minnesota Senate Committee on E-12 Finance on Monday (March 19) afternoon. Her message was clear: we need to keep the pension promises made to teachers.
The Teachers Retirement Association (TRA)—which manages pensions for the majority of teachers in Minnesota—recently admitted to a $6.4 billion deficit for 2017, assuming an 8.5 percent return. As Kim wrote about here, TRA’s Executive Director Jay Stoffel “conceded that the unfunded liability was much higher (more than $9 billion) and that the fund, without big changes, was in a downward slide.” (The fund’s new long-term investment return will be lowered to 7.5 percent because of the fund’s shortfalls, assuming approval by the legislature.)
TRA’s unrealistic assumptions about investment returns on pension assets have put the fund under pressure. For many teachers, their pension plan is long-anticipated and their only retirement security. The financial health of teachers’ pension plans affects the fund’s long-term viability. And for many young teachers, the pension promise is likely to be broken. Benefits are backloaded, and new teachers’ paychecks are used to protect the payments promised to older colleagues. Contributions from employers and employees have not met the required contributions necessary to fully fund TRA’s pension fund since 2006.
The St. Paul Teachers’ Retirement Fund Association (SPTRFA)—which manages pensions for St. Paul teachers—also needs improvements to secure its long-term stability. The fund’s actual contributions have fallen short of the required contributions since 2002, although the deficit is shrinking because the contribution rate as a percent of payroll is up to 21.6 percent (compared to 15.9 percent for TRA). Again, showing, that many teachers—young teachers especially—turn over a substantial portion of their pay to a plan with benefits they may or may not receive.
Admitting you have a problem is the first important step. And as Kim stated, TRA’s admission of its problem is “a small step forward.” But will the fund be reformed or better funded in the years to come?
Watch for Kim’s upcoming pension paper that looks ahead to the future of Minnesota’s pension plans and offers solutions to ensure promises are fulfilled.