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Labor / Public Pensions

Education News: Salary Spiking Boosts Pensions, But Cripples Taxpayers

By James V. Shuls on Jun 27, 2013

Today, Education News published my op-ed, “Salary Spiking Boosts Pensions, But Cripples Taxpayers.”

The crux of the piece is this: Imagine you are nearing retirement. You have a good pension, but if you work one more year, you could earn an additional $15,000 every year for the rest of your life. The rational decision would be to stick around for one more year. That is exactly what former Wentzville School District Superintendent Terry Adams did when he accepted the interim superintendent job in the Rockwood School District.

Missouri school superintendents are part of the Public School Retirement System of Missouri (PSRS). Like many public employee pension systems, PSRS is a defined benefit plan. This means employees are guaranteed benefits. These benefits are not tied to their contributions. In the PSRS system, benefits are paid on an individual’s final average salary of the last three years worked. By taking the Rockwood gig, Adams boosts his final average and his pension.

Let me be clear: Adams is not the problem. Nor are the countless other teachers and school leaders who make similar decisions. The problem is that we have established a system that encourages this type of behavior. The result is a growing unfunded liability problem for Missouri taxpayers.

It is time we address our pension problem by moving away from defined benefit plans. The only other options are to continually raise taxes or pray for a stock market miracle.

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About the author

James V. Shuls

Director of Research and Distinguished Fellow of Education Policy

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