NJEA LEADERSHIP HAS SECURE, GOLD-PLATED PENSIONS WHILE TEACHERS’ PENSIONS ARE INFERIOR AND AT RISK
It’s time for New Jersey’s teachers to wake up to the ugly truths and hard facts about their pensions:
- They are vastly inferior to the pensions that the New Jersey Education Association (NJEA) leadership provides for themselves – all paid for by teachers’ dues.
- The NJEA is not telling teachers the truth about their pension fund: the Teachers’ Pension and Annuity Fund (TPAF) is in such deep trouble that teachers’ and even retirees’ retirements may be at risk.
- TPAF is unfair to new and younger teachers, the majority of whom will lose money participating in TPAF and end up subsidizing the minority of teachers who make teaching a life-long career.
What is worse is that our teachers have very little choice in the matter. They have little choice but to join the NJEA and have their highest-in-the-nation dues withheld from their paychecks. They never even see the $991 that goes to the NJEA every year.
Fortified with these millions of dollars of teachers’ dues, the NJEA leadership have rewarded themselves with very generous and very secure pensions. Sunlight’s research reveals that the NJEA leadership’s pensions are superior in virtually every respect to teachers’ pensions, and that the NJEA leadership can expect multi-million-dollar pensions worth as much as $5.5 million, or six-times greater than what a teacher can expect. Their pensions are also over-funded, with $1.37 set aside for every $1 owed, so the NJEA leadership can sleep well at night knowing their pensions will be paid off as promised.
Nor do teachers have a choice about participating in TPAF: they are forced to join TPAF as a condition of their employment. But the NJEA leadership have not secured teachers’ pensions the way they have secured their own. The fact is that TPAF is in deep trouble. It is one of the single worst public pensions in America. It is severely underfunded, with only 27 cents set aside for every $1 owed, and is bleeding assets. Absent some federal bailout, it is projected to become insolvent by 2027.
Teachers need to know that should TPAF become insolvent, all bets are off. Its $4.5 billion-plus of benefits payments would have to be funded from the state budget – a near impossibility for a state in perpetual budget deficit like New Jersey. In such a disaster scenario, all teachers would likely see their pensions reduced, including longer-serving teachers with stronger legal protections. Most alarmingly, even retirees could see their benefits threatened.
Should a TPAF insolvency be resolved under a federal-bankruptcy-style process, unfunded pension liabilities would be particularly vulnerable to reduction. With TPAF only 27 percent-funded, the remaining 73 percent of its liabilities are unfunded and could be on the chopping block. If an insolvency were resolved according to state laws, all the legal protections gained for TPAF pensioners may not protect them. Even if courts found that TPAF members had a legal right to their pensions as promised, courts cannot force the legislature to appropriate funds. Pension payments would then be forced to compete with other necessary government functions in the middle of a severe fiscal crisis. In both cases, TPAF pensions would be at risk.
The NJEA leadership has not told teachers the ugly truth because teachers would be rightfully outraged that their retirements are at risk. Former San Jose, CA Mayor Chuck Reed points the finger at public employee unions like the NJEA that ignored the fact that “underfunding pensions is cheating their members.” Fortified with the truth, teachers should direct their outrage at their state union, the NJEA, which cheated them by allowing TPAF’s funding to deteriorate to these perilous levels.
In addition to being structurally unsound, TPAF is also fundamentally unfair. Today’s younger workers tend to be more mobile and change jobs more frequently than past generations, but this behavior is penalized by TPAF. As a result, Sunlight estimates that 60 percent of new and younger teachers will end up being forced to lose money – as much as tens of thousands of dollars – and subsidize the 40 percent who choose to make teaching in New Jersey a life-long career. This raises fundamental questions of fairness, with implications for recruitment and retention.
It may also raise questions of equity because research shows that high-minority schools are more likely to have younger teachers. So TPAF’s structure could be affecting recruitment and turnover, and thus the quality of instruction, in these schools as well.
Teachers are getting a very bad deal from their state union leadership. They are being forced to pay thousands of dollars more for inferior pensions that are at risk due to their leadership’s negligence. Yet, with their pensions gold-plated and secure, the NJEA leadership is blocking reform efforts that could put TPAF on a more secure and sustainable path. Teachers would be justified in asking if that would be the case if the leadership’s own pensions were at risk.
Teachers should demand better. They should demand to be told the truth about their pensions and demand answers for why they are in such peril. They should demand reforms that will secure their retirements and make the system fair for all teachers. They should demand a retirement system that works for everyone, not just the NJEA leadership.
It is time to shine a light on these facts.
Note: Andrea Riquier, “Chuck Reed warned of city services ‘insolvency’ after the Great Recession. He thinks the corona-crisis may be worse.” Marketwatch.com, August 27, 2020, https://www.marketwatch.com/story/chuck-reed-warned-of-city-services-insolvency-after-the-great-recession-he-thinks-the-corona-crisis-may-be-worse-11598540258.