The situation in a nutshell: “Teachers are frustrated over low and stagnant pay. But labor costs for districts are going up rapidly due to pension and health-benefit costs. Because these benefit cost increases do not correspond to rising benefits for current teachers — they reflect legacy costs — they are creating a larger and larger wedge between what teachers today take home in terms of wages and benefits, and school districts’ personnel costs.”
That is in California, but it fits in Louisiana just as well.
The report from Cory Koedel, a University of Missouri economist, comes from the Brookings Institution think tank, but its lessons are true beyond the Golden State to the Bayou State, and a lot of others.
The rising costs of health care, including pharmaceuticals but hospitals and doctors as well, are known to businesses public and private. Nothing seems to change that.
The problems of massive long-term pension debts, called unfunded accrued liabilities, are also chronic in many states. As in Louisiana, they arise in part because of very bad choices.
Politicians in our Legislature, as well as in many others, were loath to raise taxes or cut other spending to fund fully the future obligations for pension systems. So they avoided the political trouble, and made decisions on the basis of short-term thinking.
Over time, Louisiana has made a wiser choice to pay these down with big annual contributions from the state budget. Those payments will squeeze the budget for decades to come, but high rates of payment by schools — as well as universities, paying in for part of the UAL — also squeeze local districts budgets.
What Koedel writes about California is also true of Louisiana: Not only are teachers’ compensation options limited, but this problem can get worse.
That is because, in years of rising stock markets, the assumptions about future returns from pension systems have been rosy — as Koedel writes, far rosier than is realistic. Louisiana’s legislative auditor has pointed out that problem in Louisiana, but the administration of Gov. John Bel Edwards has failed to grapple with the difficulties.
The governor did not back a responsible effort by LASERS, the state employee system, to change to a hybrid type of pension that would be friendlier to new hires. Nor has the auditor’s call for more responsible forecasts of retirement systems' returns received any help from Edwards.
It’s troubling that this massive debt problem, for LASERS and teacher systems, has not drawn much effort from Edwards’ team — or legislators. That’s one of the big unfulfilled agenda items for the next governor, either Edwards or one of his challengers in the fall elections.