A new report commissioned by school-choice advocates says Indiana's pension fund for retired teachers is woefully under-funded and among the most financially vulnerable in the nation.
The national study, released by the Foundation for Educational Choice and the Manhattan Institute for Policy Research, found that teacher pension liabilities for all 50 states total almost $1 trillion, nearly three times the cost of what state officials have on their balance sheets.
Indiana, according to the report, has significantly underestimated the cost of paying the lifetime benefits guaranteed by law to the state's retired schoolteachers and is one of the nation's five most under-funded
teacher pension programs. West Virginia is cited as the most under-funded.
A spokeswoman for the Indiana State Teachers' Retirement Fund declined comment but the study backers say the report's finding are ominous for taxpayers and lawmakers alike.
"States are already caving under the pressures of the recession and this is bad news for governors and state legislatures," said Robert Enlow, president and CEO of the Indianapolis-based Foundation for Educational Choice. "Every dollar in the red ink column for pensions is one less dollar that is used to educate children."
The Indiana State Teachers Association, a defender of guaranteed pensions for its members, also declined comment on the report. Critics of similar reports questioning the viability of public pension funds say such
findings are an attack on pension plans for public employees and motivated by politics. Enlow, who heads an organization devoted to advocating for school choice and changes in how schools are funded by taxpayers,
dismisses that criticism.
"This isn't a right-wing problem or a left-wing problem," Enlow said. "It's a financial problem."
Earlier this year, the Pew Center on the States issued a report that raised questions about Indiana's public employee pensions. The study found that Indiana is one of 19 states that failed to set enough money aside to pay for future retiree health care and benefits obligations. The Pew Center study said Indiana fell short by more than $442 million.
In the 18-page report released by Enlow's organization, titled "Underfunded Teacher Pension Plans: It's Worse Than You Think," says the nation's teacher pension funds report their liabilities at $332 billion.
But using what the report calls "private sector-style discounting," the liability is closer to $933 billion, the report says.
Enlow said the report was released in part to compel states to adopt laws that would force them to "honestly account" for the costs of meeting their future obligations under pension funds. He said that under current laws, state pension funds can lowball the amount needed to meet future pension obligations based on higher-than-expected returns on the performance of stock investments.
Also included in the findings:
- California has the largest unfunded teacher pension liability: almost $100 billion.
- The lowest funded plan is West Virginia's, which study authors say is funded at only 31 percent.
- Four states are funded at less than 40 percent: Indiana, Illinois, Oklahoma and Kansas.
The report says that only $116 billion of the shortfall nationally can be attributed to the stock market drop brought on the financial crisis of 2007. Report authors say the Dow Jones Industrial Average would have to
nearly double overnight to make up for the present under-funding of these plans.
To read the full report, go to www.edchoice.org