Page 455 – Show-Me Institute

Current Teacher Pension Systems Impose A “Tariff” On Labor

Posted on February 28, 2014January 13, 2026 by James V. Shuls

As first appearing in TeacherPensions.org on 25 Feb, 2014, and Education Next on 26 Feb, 2014:

In Missouri, students in unaccredited school districts can now choose to enroll in neighboring accredited school districts. Some students who have elected to leave their struggling school now find themselves riding a bus for more than two hours a day. This has led many to question the school transfer idea and look for alternative solutions. Some have begun to ask, “What if instead of busing students from failing school districts to accredited ones, we bused great teachers from accredited schools into the failing districts?” It is an idea that has won a fair amount of attention.

Last November, the Cooperating School Districts of Greater St. Louis pitched the idea of providing high-quality teachers as instructional coaches in struggling schools. A similar idea was raised by CEE-Trust, the consulting firm that the Missouri Department of Elementary and Secondary Education hired to address problems in the Kansas City School District. The CEE-Trust proposal called on accredited school districts “to play a significant role in helping [unaccredited] systems improve.” The St. Louis Post-Dispatch heaped praise on this idea, calling it among the “more promising ideas.”

However, there is one easily overlooked obstacle standing in the way of turning this localized version of a teacher peace corps into a reality in Missouri’s two biggest cities: the incompatibility of different pension systems.

With the exception of Saint Louis and Kansas City, which have autonomous pension systems, all of Missouri’s school districts are part of the Public School Retirement System (PSRS). If a teacher moves from PSRS to one of the city plans, he or she will incur a significant loss in pension wealth. Koedel, Ni, Podgursky, and Xiang, economists at the University of Missouri and authors of a recent report from the Ewing Marion Kauffman Foundation, put it this way:

Consider two teachers who work thirty-year careers in the profession. The first teacher works all of her thirty years in a single plan. The second teacher works fifteen years in one plan and then fifteen years in another. Because of the way pension wealth accrues in these plans, the latter teacher will have less than half the pension wealth of the former teacher at age fifty-five.

Though this may sound like a Missouri problem, it has bearing nationwide. As the Kauffman report notes, Missouri’s separate pension systems are “a microcosm of larger national issues concerning teacher pension systems—particularly the ability of teachers to move between systems.”

Just as teachers in Missouri cannot move between pension boundaries without incurring a financial penalty, teachers cannot move across state pension boundaries without incurring similar costs. Which means, a charter operator with campuses in multiple states, like KIPP, Uncommon Schools, Achievement First, or Rocketship Education, cannot freely move a teacher or school leader between their schools in various states. Indeed, these systems punish all teachers who move from one state to another.

Koedel, Ni, Podgursky, and Xiang liken the costs associated with switching between pension systems to a tariff, “Rather than promoting free trade and labor mobility, the pension plans effectively are imposing a tariff on the import or export of human capital between” the separate pension systems.

This “tariff” on labor is not a new problem, but a longstanding one that Saint Louis and Kansas City have been struggling with for years. Prior research has demonstrated that the separate pension systems create a barrier to recruiting school leaders into the two urban school districts. The separate pension systems also limit the pool of teachers who are willing to work in the cities. Jeffrey Kuntze, chief operating officer of the Confluence Charter Schools in Saint Louis, says “the separate pension systems make it extremely difficult for us to recruit veteran teachers from the county. We can get them when they retire, but not mid-career.”

Missouri’s pension boundaries would make it practically impossible for high-performing school districts to operate a program, run a school, or loan teachers within the Saint Louis or Kansas City boundaries, just as state pension boundaries would make it impossible for schools to effectively work across state lines. They simply could not move teachers or school leaders across pension boundaries without making them suffer great financial penalties.

The only real way to solve this problem is to close the current systems to new entrants and place them in a new, statewide system that participates in Social Security and has smooth wealth accrual. Before this idea causes mass hysteria, let me stress that this would not affect current employees’ or retirees’ pensions. They would remain secure in their current system. It would, however, remove the artificial pension boundaries and allow us to create a better pension system for teachers and students.

Opponents of this idea claim that closing the current defined benefit systems would be financially unsound, as it would lead to considerable “transition costs” that would far outstrip any benefits that we may receive. This is the very issue tackled in a recent Show-Me Institute policy study by Andrew Biggs, a resident scholar at the American Enterprise Institute. Biggs examines the evidence for “transition costs” and concludes that the concerns are “largely mistaken and should not stand in the way of public employee pension reforms.”

Whether you believe busing teachers into failing schools is a viable solution or just another feel-good proposition, fixing this pension problem should be a top priority for Missouri and other states throughout the country. Missouri should not have a system that puts our neediest communities at a disadvantage when it comes to recruiting talented teachers and states should not impose a tariff on attracting quality teachers and school leaders.

James V. Shuls, Ph.D., earned his bachelor’s and master’s degrees in elementary education and taught for four years in the Republic School District. Currently, he is an education policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy. His wife is currently vested in PSRS.

Michael Podgursky, Ph.D., on the Minimum Wage

Posted on February 27, 2014January 13, 2026 by Michael Podgursky

Michael Podgursky, Ph.D., responds to recent arguments to raise the minimum wage. While raising the minimum wage would help a few low-skill workers, it would also eliminate many low-skill jobs. Podgursky says there’s a better way.

Marking-Up And The Funky Bunch

Posted on February 27, 2014January 13, 2026 by Michael Rathbone

In last Saturday’s blog post regarding the disagreement between the Missouri governor and the legislature about state revenue estimates, I mentioned marking-up legislation. Marking-up basically means that members of a Missouri House committee are taking an introduced piece of legislation and amending it to fit their preferences (e.g., the Budget Committee and the Budget).

Usually, when crafting the budget, the House Budget Committee starts with the governor’s executive budget as introduced legislation. It then assigns these introduced bills to different appropriations committees depending on the department being funded. However, due to the disagreements about expected state revenues, the House is not doing that this year. Instead, the House is working off of last year’s budget and making changes based on that.

The House is doing this mainly for the sake of appearances. Representatives don’t want to be seen as cutting spending in popular areas such as education when compared to what the governor introduced in his budget. That’s understandable, but unnecessary. The House should fund education at the levels it believes are proper given the constraints that limited state revenues impose. If that happens to be less than what the governor suggests, then so be it. If it’s less than what was spent last year, that is fine as well. Don’t spend more just because you want to be seen as spending more.

The chairman of the House Budget Committee, Rep. Rick Stream, has asked appropriators to go line-by-line through the budget and find items to cut in order to free money for other, more important programs. The Show-Me Institute has highlighted several areas which appropriators could cut, such as ethanol subsidies. Hopefully, we can see some cuts to non-essential areas.

Creating a budget is arguably the most important task the legislature has every year. Being informed of how that process works is something worth knowing. The House really wants you to know that it plans to increase spending, just less than the governor does. Hopefully, representatives will get to a point where they can justify the spending levels they set, whether it is more or less than last year.

Education Savings Accounts Are Good For Kids

Posted on February 26, 2014January 13, 2026 by James V. Shuls

On Feb. 24, the Mississippi Clarion-Ledger published an editorial supporting the establishment of education savings accounts (ESA) in the Magnolia state. The Mississippi ESA proposal closely resembles a proposal currently before the Missouri Legislature in that it would provide support to students with special needs. Essentially, it would allow students with special needs to receive financial assistance from the state. The students could then use that money to tailor their education to fit their needs.

The Clarion-Ledger wrote:

The Parents’ Campaign and others who oppose the proposal — called the Equal Opportunity for All Students with Special Needs Act — claim it’s a voucher program that would strip money from local districts.

But parents of special-needs children and others who support it say it’s a lifeline and a last-resort measure that will give them the ability to do what the state apparently cannot: Educate their children.

School districts doing a good job educating special-needs children have little to fear. Nary is the parent who will withdraw a child from an excellent educational setting.

In Florida, which passed a statewide choice program for special-needs students in 2001, just six percent of eligible students use the program, according to the Florida-based Foundation for Excellence in Education.

We support public schools, but we cannot support the systemic failure of certain students over the course of several decades without any signal from MDE that something will change.

As I have written before, “the beauty of ESAs is that they are versatile.” They put children and their families in the driver’s seat regarding their education. The Clarion-Ledger editorial board recognizes this fact.

Arizona was the first state to create an ESA program and parents have been very satisfied. Mississippi, Oklahoma, and Iowa may be the next states to adopt an ESA program. Will Missouri join that list? It would certainly help if papers such as the St. Louis Post-Dispatch or the Kansas City Star came to the same conclusion as the Clarion-Ledger — that ESAs are good for kids.

(H/T Matt Ladner and Jay Greene.)

Paycheck Protection Bills Return To The Missouri Legislature

Posted on February 26, 2014January 13, 2026 by Patrick Ishmael

One of Americans’ most fundamental rights is the right to free speech. Unfortunately, that right often is undermined in the area of public employment. Many public employee unions not only collect dues for their representation, but they also collect them for political activity. Generally speaking, the presumption is that the employee supports the union’s politics, even though that’s not always the case.

Shouldn’t unions have to compete for their political dollars and donations like any other interest group? I think so. That’s why “paycheck protection” reforms are so important: they allow employees to opt in to paying for a union’s politics, rather than forcing them to opt out. The presumption, in other words, is that the employee’s political dollars are first and foremost the employee’s, not the union’s. That modest reform would re-balance the power of dues collection in favor of public employees rather than defaulting in favor of public unions.

The good news is that Missouri’s legislature passed a law last year that would have rectified the problem. The bad news is it was vetoed, and that veto wasn’t overridden during the special session.

But the (other) good news? Variations of that legislation are currently circulating in the Missouri House. HB 1093 and HB 1617 address the issue directly, requiring a separate consent form for dues to be collected and used for union political purposes. HB 1093 is particularly good in requiring an accounting of dues to ensure that dues earmarked for representation are not spent on politics. Without that verification mechanism, it would be difficult to determine whether the law is being followed and whether employees’ free speech rights are being upheld.

I will keep an eye on both of these bills; stay tuned.

The Kansas City Streetcar Advisory Panel Is Just For Show

Posted on February 25, 2014January 13, 2026 by Patrick Tuohey

The panel appointed to advise Kansas City Mayor Sly James about the best route for the southern extension of the streetcar met on Saturday morning, and many were skeptical. Of course, Kansas City voters have rejected similar rail efforts for years so this is no surprise.

Whatever the advisory group decides, however, is moot. That is because the city’s petition for the creation of a special taxing district and the increased sales and property taxes therein has already been submitted to a judge for consideration. Nothing this advisory panel does will change it, nor is any decision they reach binding upon the city. As the Kansas City Star published:

Kansas City Councilman Russ Johnson told the group: “We’ll do everything we can to incorporate the preferred alternative.”

Kansas Citians are being asked to commit to very specific and enforceable sales and property tax increases in return for a vague notion of where those rails will be laid; the city is not willing to commit to a specific route. In the petition to the court, the city spends about seven of 15 pages (pages 6 through 13) detailing how the taxes are to be assessed and collected. As for the route, that receives less than one page (page 4) of vague statements such as (emphasis added):

The Expansion Routes will connect to the Starter Line, and are expected to run generally along (i) Independence Avenue, east from the Starter Line, (ii) Linwood Boulevard and/or 31 and (iii) Main Street and/or the public right of way commonly referred to as the Country Club Right of Way or public streets in the vicinity thereof, south from the Starter Line, all as generally depicted on Exhibit D…

The petition does not even include the consideration of public input as to the route, its ending, or the placement of stations. Those will be decided by “further design and engineering.”

The specific Expansion Routes, their respective termini (which may be closer to or farther from any such Expansion Routes’ connection to the Starter Line) and the specific location of embark/disembark points, remain subject to refinement or alteration following further design and engineering;

For the sake of transparency — and an informed electorate — the City Council should have undertaken “further design and engineering” before convening an advisory board and submitted the petition to a judge. But they didn’t, and so the effort to seek citizen input is a tale told by streetcar supporters: “full of sound and fury, signifying nothing.”

Why Would Unions And Some Big Businesses Support Raising the Minimum Wage? Some Reasons

Posted on February 25, 2014January 13, 2026 by Patrick Ishmael

Last week’s Congressional Budget Office (CBO) report brought the negative effects of a proposed minimum wage hike into sharp focus. The CBO found that while wages would, by definition, increase for some employees, up to a million of our most vulnerable workers could lose their jobs. For all the bluster about free-market advocates being “anti-worker,” I can’t imagine a more anti-worker effect to a policy than the one you would see with a minimum wage increase. After all, what could be worse for a laborer than having his or her job taken away?

That’s what makes support for a minimum wage increase from unions and big business seem so odd at first glance. Why would unions such as the American Federation of State, County and Municipal Employees (AFSCME) support a change of policy that would hurt hundreds of thousands of Americans? Why would some businesses want to increase the cost of labor?

A few reasons stand out.

For starters, artificially raising the cost of non-union labor can make union labor more attractive. As the Cato Institute noted more than a decade ago:

Unions are labor cartels that attempt to restrict the supply of workers entering given occupations. Since non-union labor is priced below the cartelized price of union labor, it is an attractive substitute for union workers. Because unionization of all potential competition to the cartel is impossible due to the high policing costs that would be involved, unions resort to the minimum wage. By artificially increasing the wage rate of lower skilled workers — who could substitute for union workers — the minimum wage increase the demand for union workers and hence their wage rates.

Hypothetically speaking, if the labor of an entry-level employee with no experience is worth $7.50 per hour in the open market but the law requires he be paid $15 per hour, trained union labor costing $20 per hour looks considerably more attractive. By harming non-union labor, unions are able to help themselves.

Moreover, some large businesses have supported increasing the minimum wage because it would harm their competition. Costco, for instance, supports raising the minimum wage today at least in part because the entry-level wage for a Costco employee is $11.50, more than $4 per hour above the federal minimum. At a minimum wage of $10.10 per hour, Costco’s business model would remain largely unaffected.

But you know who would be affected by the change in the law? Businesses, large and small, whose profit margins are far narrower. That’s especially true of small businesses in our communities already suffering under a mountain of tax and regulatory burdens in a difficult economy.

Yes, there are, no doubt, some in both the business and labor camps who in good faith might think a minimum wage increase won’t hurt our vulnerable poor. But labor and business leadership know better, and the economics are as clear as the incentives.

Strong Arm Of Public Employee Unions Reaches For Home-Care Workers

Posted on February 24, 2014January 13, 2026 by Patrick Ishmael

Last year, I wrote extensively about “paycheck protection,” an issue that deals with public employee unions and how they collect their political dues. But there are many facets to the public employee unionization problem beyond political dues. One of particular note is the forced unionization of home-care workers. Pamela Harris takes care of her disabled son Josh in Illinois, but because the state pays for Josh’s care, Illinois wants to force Pamela — Josh’s mother and caretaker — to join and pay dues to a public employee union.

The government is arguing that because people like Harris receive taxpayer money, they are state employees subject to union dues, though not the pensions and liability coverage that their fellow public sector workers receive. Harris was puzzled by the classification, considering that unions cannot negotiate other benefits for her family because the Medicaid program is capped.

The state receives very personal and comprehensive care for Josh, its intended beneficiary; Pamela gets to help her son. And obviously, this wasn’t a fight Pamela was picking. She just wants to take care of her child.

“I don’t want to be the face and name associated with an anti-union campaign, but this is at its heart a mother doing what she thinks is right for her son,” she told the Washington Free Beacon. “I don’t see this as a union issue, but the current administration in Illinois has an unhealthy relationship with public sector unions. We got swept up in that.”

Her son Josh, 25, has a rare muscular genetic disease called Rubinstein-Taybi Syndrome that has left him intellectually disabled, non-communicative, and unable to control his body. She bathes him, brushes his teeth, pops his dislocated limbs back into place, and takes him to meetings with doctors, specialists, and therapists.

Think this is just an Illinois problem? You might want to reconsider that assumption. In 2008, Missouri voters passed the Quality Home Care Act, which gave comparable power to the home-care unions in Missouri to force home-care workers to pay them tributes — I mean, dues. As the Missouri Chamber of Commerce noted (emphasis mine):

The Quality Home Care Act makes it easier for these workers to unionize and begin the collective bargaining process. The language allows a vote to go under union representation if just 10 percent of the workers expressed a desire to organize, compared to the 30 percent that is usually required. It requires all personal care attendants to pay union fees. In addition, the election to determine union representation would be conducted via mail ballot and not by secret ballot, which is current law.

This issue, now sitting before the U.S. Supreme Court, is not just a problem in Illinois — it’s a Missouri problem, too, and one we’re closely watching. Pamela Harris shouldn’t have to fight a union to take care of her son, and no worker should have to deliver unions a ransom to work in a given field. We’ll keep you posted.

Are Centralized Standards Needed For A World-Class Education?

Posted on February 23, 2014January 13, 2026 by James V. Shuls

On Thursday, sporting my tin foil hat, I drove to Jefferson City to testify against the Common Core State Standards. For a long time, proponents of Common Core have tried to paint detractors as a bunch of kooks. And to be honest, there are some ideas floating around that are a little wacky. But proponents who attempt to smear all Common Core cynics as conspiracy theorists, nut jobs, or crazy people ignore many of the issues surrounding the new de facto national standards.

Part of the problem is that supporters and opponents of the standards are too often talking past each other. Supporters put blinders on and say, “Common Core are just standards.” Opponents, on the other hand, too often point to all of the other stuff – data mining, recommended texts, etc. – and they ignore that the “Common Core are just standards.”

While I believe “all the other stuff” is important, let’s not neglect the argument about standards. Sometimes, we need to engage the proponents on their terms. Sometimes we need to talk about the standards. That is what I tried to address in my testimony.

Do we even need centrally imposed standards? Missouri did not adopt statewide standards until 1996. That’s right, for 175 years Missouri did not have centrally imposed standards. I imagine many of you reading this grew up in an era without centrally imposed standards. Does that mean that we did not have any educational standards? By no means. Rather, these decisions were decided at the local level.

Think about private schools. Without government coercion, many private schools have established learning standards that are more rigorous than our state standards. Yet, for some reason, we have come to believe that the only way we can have a world-class education system is to have a centrally governed education system that imposes standards on local schools. That is simply not the case.

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