Teacher Pension Bombs

[Geee]

American Spectator:

Teacher Pension Bombs
By RiShawn Biddle on 11.12.10 @ 6:07AM

California taxpayers have almost become immune to stories about the high cost of generous defined-benefit pensions, employer-subsidized healthcare plans, job protections and degree- and seniority-based pay scales struck by the state, school districts, and affiliates of the National Education Association and American Federation of Teachers. Not even the fact that 3,090 of its retired teachers are earning more than $100,000 a year in annuity payments causes a stir.

But they are getting riled up -- and learning about such concepts as internal rate of return and special situation fund -- thanks to the notoriously underfunded California State Teachers Retirement System. Over the past four decades, CalSTRS has fueled these pension deals by offering rates of return on its portfolio that were way too optimistic given the historic volatility of the stock and bond markets. Even now, CalSTRS assumes that its portfolio will increase in value by eight percent a year, three points higher than the 20-year compound annual growth rate for the S&P 500 stock index. To meet those return rates, CalSTRS has spent the past three decades pouring money into an array of hedge fund and other risky investments, including purchasing minority stakes in private-equity firms and real estate deals that haven't exactly panned out.

But these days, CalSTRS can no longer keep up the ruse. Thanks to an (official) $23 billion pension deficit, billions more in investment losses (including $43 billion in the 2008-2009 year alone), and embarrassing reports about its unrealistic investment expectations, it is preparing to reduce its expected annual rate of return to a barely less-inflated 7.5 percent. The state government and districts will have pony up $5 billion more a year just to meet the growing payouts to the pension's dependents. By the way, CalSTRS' request comes just as news came out that it paid $1 million in bonuses to its top officials -- including $116,604 to its chief investment officer.

[Stella]

Laura Bush was such a strong advocate for teachers, that somehow I wonder if this war would be waging if GWB was in office. This is an extension of the class and race war that the Democrats have started. People are rebelling against the outrageous union contract pensions. This has been coming for years. Every single time there is an upcoming school referendum in my community, we also get letters to the editor about the "poor teachers" who have to spend 4 hours a day teaching our children. According to their union contract, they are only allowed to teach 4 hours and use the rest of the time for grading, calling parents and working out teacher plans. In reality, on any day you can find them in the local mall.

 

I don't think anyone has a problem with teachers earning a just pay. At a time, when people are losing their jobs and pensions and living on less it somehow seems obscene to be pushing referendums to raise the pay and once again the pensions on bankrupt state. The teachers, via their unions, never agree to take less benefits or wages.