We're Screwed Again

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REPORT: NY TEACHER PENSIONS SHARE U.S. UNDER-FUNDING WOES
New York—face pension obligations far greater than they admit, according to a
newly issued study from the Manhattan Institute for Policy Research including a funding gap of
more than $60 billion in the two New York systems.
The study, entitled “Underfunded Teacher Pension Plans: It’s Worse Than You Think,” says
current government accounting standards have allowed teacher pension funds across the country to
overstate their ability to make good on pension promises to active and retired teachers.
“The funds aggressively ‘discount’ the cost of paying benefits in the future because they
assume that stocks’ values will be much higher by the time the funds have to pay out those
benefits,” the study says. “This assumption permits public officials to contribute fewer dollars
toward satisfying these plans’ obligations, and thus to avoid taking the cautious but unpopular step
of raising taxes or cutting services.”
The study’s authors are Josh Barro, Manhattan Institute’s Wriston Fellow for state and local
fiscal policy, and Stuart Buck, a lawyer and doctoral candidate at the University at Arkansas
Department of Education Reform. Barro and Buck developed a table presenting the official estimate
of “funded status” for every state . Their findings included the following:

• The New York State Teachers Retirement System (NYSTRS), which officially estimates its
funded status at 107% of needed assets, is actually $24.8 billion short of what it needs to
meet its obligations
Growing teacher pension obligations mean that “schools unfortunately will have to compete
with retirees for scarce dollars” in the future, Barro and Buck write, adding: “This competition is
uneven, because retirees have a legal claim on promised pension benefits that supersedes schools’
budgetary needs. Consequently, Americans can look forward to higher taxes and cuts in services,
resulting in fewer teachers, bigger classes, and facilities that are allowed to deteriorate.” FOR MORE INFO:

http://www.manhattan-institute.org/html/cr_61.htm