Teacher Pension Costs Triple Since 2001, Report Says

The share of state and local education funds being spent on teacher retirement costs in the U.S. has tripled since 2001 and is significantly outpacing K-12 education spending, according to a new report from the Equable Institute.

The report, Hidden Education Funding Cuts: How Growing Teacher Pension Debt Stresses America’s K–12 Education Budgets, analyzes education spending relative to growing teacher pension debt at state and local levels. The report looks at the scale of hidden education funding cuts by state and is intended to show how states have “exacerbated and avoided” the impact of teacher pension debt costs on education budgets.

According to its findings, the share of state and local K-12 education spending going to teacher retirement costs increased 322% from 2001 to 2020, from 1.3% of state and local K-12 spending in 2001, to 5.5% in 2020.

The report also said that since 2002, total retirement contributions paid have increased 220%, while state and local K-12 funding increased only 33%. It added that 69% of all teacher retirement costs went to unfunded liability payments in 2021, which translates to a 414% increase over two decades.

Pension costs took up 15.65% of all state-only K-12 education funding in 2021, an increase of more than 100% since 2001, when pension costs accounted for 7.03% of state-only K-12 spending. Additionally, the report said that the value of teacher retirement benefits has declined 6% since 2002, while the cost of providing those benefits has ballooned by 93%.

Equable said that although its findings show a widespread impact of teacher pension debt on education budgets, each state has its own specific challenge. According to the analysis, the states with the biggest increases in “hidden funding cuts” since 2002 were Illinois, Pennsylvania, Michigan, Connecticut and New Jersey. The states with the smallest increases since 2022 were North Dakota, Tennessee, Idaho, Wisconsin and Ohio.

“The problem for the future of school funding is growing pension debt for teacher retirement plans,” Equable Executive Director Anthony Randazzo, co-author of the report, said in a release. “The cost of paying for these unfunded liabilities is growing much faster than the growth rate of K-12 spending generally. Without a change to the way that states pay for teacher retirement costs, hidden education funding cuts will keep growing.”