AJOC EDITORIAL: How much is enough?
Those responsible for recruiting teachers to Alaska have a funny way of going about it.
In this issue we quote Gateway School District Superintendent Scott MacManus, who says Alaska is “not competitive” for pay and that its 401k system for teachers is “not seen favorably.”
Given that public position you have to wonder what exactly is MacManus’ pitch to prospective teachers at job fairs if he thinks conditions are so horrible for teachers in Alaska.
Alaska teachers on average make $67,433 per year according to 2016 data compiled by the National Education Association, which is about $10,000 more than the average wage for all occupations in the state and nearly $9,000 more than the national average for teachers.
While teacher advocates complain about the state cost of living, they fail to note there are no state income, sales or property taxes.
There is also a complaint that teachers aren’t eligible for Social Security. That stems from a decision that goes back to the 1950s when Alaska elected to create a pension system for public employees rather than opt in to the Social Security system. (Correction: Teachers in Alaska were covered in the territory under the Teacher Retirement System. After the Social Security Act was amended in 1950 to allow public employees to enroll, the territory expanded retirement benefits to all of its non-TRS employees by signing a Federal Social Security Agreement. This benefit for governmental employees was later offered by the territorial legislature to employees of political subdivisions across the State, excluding members of TRS, and the agreements continued after statehood in 1959. In 1978, the public employees opted to end their participation in Social Security with the agreement the state would develop an alternative plan. Source: State of Alaska Division of Retirment and Benefits)
While it’s true teachers aren’t eligible for Social Security, they are also not subject to paying 6.2 percent of their income in the payroll tax, which increases their take home income by more than $4,100 per year for the average salary.
The more than 3,000 teachers in the Anchorage School District, by far the largest in the state, pay nothing toward their health insurance premiums that are nearly $1,600 per month.
With an 8 percent 401k match from the state, that adds up to an additional $5,400 benefit for the average salary each year. Financial planners advise saving 10 percent to 15 percent of income per year toward retirement; Alaska teachers are able to put away 16 percent of their income annually.
In sum, teachers in Alaska earn more than the average worker, they pay less in taxes and health insurance premiums then the average worker, and they have a more generous 401k match than virtually any other worker.
(Without knowing the details of every private company 401k program it’s impossible to say nobody else receives an 8 percent match, but it is safe to say those who do are exceedingly few in number.)
But to hear MacManus and NEA Alaska President Tim Parker tell it, every state has a better pension system than Alaska because it is the only one that uses a 401k program instead of a defined benefit system.
Teachers have been striking in states across the country, and a May 1 Associated Press article headline noted the reason: “High pension costs lurk behind US teacher push for more pay.”
School districts around the nation including Alaska have racked up a half-trillion — yes, $500 billion — in pension liabilities.
That means teachers’ wages are being frozen to pay down debts for current retirees and having their own future benefits cut.
“I think what you see happening in the state and local and municipal sector is it has now become very, very clear how expensive defined benefit plans are. I think we’re headed for a big crisis across the country,” said Olivia Mitchell, executive director of the Pension Research Council at the University of Pennsylvania, according to the AP story.
“Pensions are now becoming the tail that wags the government dog, if you will.”
Three nonpartisan think tanks that have examined the issue — which don’t have a stake in Alaska teacher income — all grade the state 401k system as far better for new teachers than the pensions that are bankrupting other states.
Alaska was one of only nine states that didn’t get an “F” from Bellweather Education Partners; the Urban Policy Institute gave Alaska a “B” for new teacher hires; and the National Center for Teacher Quality gave Alaska the only “A” grade in the country for creating a portable, 401k-style plan for new teachers in which they get to keep 100 percent of their retirement savings compared to the national average of 28 percent.
According to NEA data, only two states and the District of Columbia spend more per student than Alaska and no state spends more as a percentage of total income than Alaska.
That raises the question there doesn’t seem to be an answer to from those arguing for more pay and a generous defined benefit pension system: how much is enough?
Andrew Jensen can be reached at [email protected].