If Public Pensions Are a Sinking Ship, Charter Schools Are Smart Rats

Sixteen states allow charter schools to opt out of their foundering state pension plans, with the unsurprising result that charters are doing their best impressions of Esther Williams as a rodent.

A new study from the Thomas B. Fordham Institute examines six of the most charter-heavy states and finds that charters bail on the state pension plan at a very high rates—only one in four charters in Florida are part of the state plan. (In California and Louisiana public employees are essentially forced into traditional pension plans by being legally ineligible for Social Security.)

It turns out that in the absence of participation in elaborate, top-heavy defined benefits pensions, charter schools behave more or less like private-sector firms with at-will employees, offering 401(k) or 403(b) plans where employees save for their own retirement in portable plans—or nothing at all.

By opting out of state pension plans, charter schools give public sector unions yet another excellent reason to hate them. Teachers at charter schools tend to be younger, and less likely to spend their entire careers in teaching. By contrast, teachers union leadership tends to be at or near retirement age. And without the infusion of cash from new participants in the system, the already-bleak prospects of the traditional pension plans begin to look even worse.

From the Fordham report's conclusion:

Charter schools were created in part to serve as laboratories for innovative practices and alternative approaches within the broad framework of public education. In certain areas, such as personnel policy, they've diverged considerably from traditional public school practices. Most, for example, forego formal collective bargaining and conventional teacher tenure. Many use various forms of differentiated and performance-related pay. This study, the first of its kind, makes clear that some charter schools are also innovating in the teacher-pension arena….From a financial perspective, it is time to rethink teacher pensions—and charter schools may point the way forward.

Via Michael Petrilli.