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The impact of late-term pay raises on teacher pension obligations in three states: California, Illinois, New Jersey

PFM, Vol. 16 No. 2, (2016)

As policymakers seek ways to regain control of burdensome teacher pension liabilities, many are overlooking an important lever to influence long-term debt obligations. Due to the complex structure of the pension allowance itself, an educator?s final retiring salary is a central factor to an individual?s pension benefit, and also one that is still squarely under policymakers? control. And yet, leaders do not appear to recognize the link between pay raises awarded to teachers near retirement and the longer-term obligations they generate (in part because those awarding raises may be in different governmental agencies than those responsible for pension debt). This paper aims to clarify the magnitude of debt triggered by late-term pay raises and reveal an overlooked opportunity for policymakers at state and local levels to work more collaboratively in clarifying the link between educator compensation and pension priorities.

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