ST. LOUIS | The retirement system for most public school teachers in Missouri is looking at an option that would reduce benefits for future teachers as a means of dealing with an increasing gap in funding.
The St. Louis Post-Dispatch reported Wednesday that officials say something must be done to pay for the pensions already promised to current teachers and retirees.
The problem is the stock market collapse of 2008 that resulted in a loss of $5.3 billion in assets held by the Public School Retirement System of Missouri. Investments gained ground last year, but revenue is still short of covering liabilities.
The system provides the pension for about 80,000 educators and 44,000 retirees in Missouri. Every public school district except St. Louis and Kansas City participates, as do most community colleges.
Teachers currently pay 14 percent of their salaries to the system, and school districts match the money. Those figures rise to 14.5 percent next year. Teachers in the system do not pay Social Security taxes or draw Social Security benefits. The benefit package is considered among the best in the nation.
The stock market plunge was costly. System official estimate there is enough money now to fund only about 76 percent of future liabilities, down from 103 percent in 2000.
Retirement system executive director Steve Yoakum warned that if costs aren't reduced, teachers and districts could eventually have to pay 19.5 percent each.
School officials say the current payment is hard enough for young teachers making entry-level salaries. It's also hard for cash-strapped districts.
"I don't see how we can keep increasing this rate year after year after year," Bernard DuBray, superintendent of the Fort Zumwalt School District in St. Charles County, told the Post-Dispatch. "It's becoming a serious burden."
The two-tiered plan under consideration would cap the contribution rate at 15 percent for current teachers and 12 percent for new teachers getting the reduced package. It would reduce pensions for teachers hired after June 30, 2013, by roughly 15 to 20 percent, Yoakum said.
After 30 years of service, current teachers draw 75 percent of their compensation, which includes salary and board-paid health insurance, as a pension. Under the proposal, new teachers would draw 60 percent of salary and insurance after 30 years. So a teacher earning $60,000 annually would get $36,000 annually in pension, down from the current $45,000.
Meanwhile, the normal retirement age would increase by two years, to 62. Provisions allowing teachers to draw full benefits earlier would be eliminated.
If a consensus is developed among teachers groups, a bill will be drafted to take to state lawmakers, perhaps in 2012. The Legislature must approve any benefit changes.
The National Conference of State Legislatures says that at least 11 other states have increased employee contributions, reduced benefits or lengthened how long employees must work to receive pensions.