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Teacher pensions: The math adds up to a crisis

Teacher pension plans across the country are staggering from a half-trillion dollars in debt. Put in perspective, that's more than $10,000 worth of debt for every student in the nation's primary and secondary schools.

In 2014, state teacher pension systems had a total of $499 billion in unfunded liabilities, which has risen $100 billion in just two years, according to a new report from the National Council on Teacher Quality, a nonpartisan research and policy group dedicated to restructuring the teaching profession.

The report card on teacher pensions found that 70 cents of every dollar contributed to state pension systems pays for this massive debt rather than covering current employees' future retirement benefits.

"The math on state teacher pension policy doesn't add up," suggested Sandi Jacobs, the organization's vice president. "The funding crisis is staggering, yet the structure of most states' pension systems isn't giving teachers what they need."

The NCTQ collectively awarded states a "C-" for their teacher pension practices. Mississippi received the lowest grade (F) because of conditions such as long vesting periods and a poorly funded system. Only Alaska earned an "A" for its pension practices, while South Dakota received the next highest grade (B+).

Researchers concluded that just eight states and the District of Columbia appear to have well-funded teacher pension systems. Those states are Delaware, Idaho, North Carolina, Oregon, South Dakota, Tennessee, Washington and Wisconsin.

Since 2008, according to the advocacy group, more than half of states have increased teacher pension contribution rates and 36 states require "excessive" teacher contributions.

States have also been increasing the time period before teachers are vested in a pension. Fifteen states require them to work 10 years before vesting. The report also noted that fewer than half of teachers will qualify for retirement benefits.

In spite of overwhelming evidence that today's pension practices can't be sustained, the NCTQ laments that state legislators, regulators and pension boards "continue to deny or ignore the crisis."

The advocacy group made numerous recommendations to fix the broken pension systems. Among them was to stop using unrealistic assumed rates of return on pension funds that makes it easier to claim that smaller contributions to these systems are adequate because future investment returns will be high.

Other suggestions said pension plans must start paying down the growing debt, teachers should be able to vest in their retirement system no later than the third year of employment and their pensions should be portable.