STUMP » Articles » While Teachers Agitate for Remote Teaching, They Should Remember Their Pensions » 9 January 2022, 14:40

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While Teachers Agitate for Remote Teaching, They Should Remember Their Pensions  


9 January 2022, 14:40

Nutshell of my argument below:

  • Some teachers unions, such as in Chicago, are pushing for remote schooling as omicron cases of Covid spread
  • These are primarily in Democrat-run cities/areas, and politicians there are having short-term panics re: 2022 elections
  • There is a longer-term danger to teachers’ pensions, as many of these are underfunded and depend on growing tax bases
  • We’ve seen many of these places lose population due to people simply moving (not just dying)
  • Teachers and their union representatives need to think longer-term — they may minorly reduce a short-term risk of a disease most of them (vaccinated) can deal with, while greatly increase the risk of undermining the future of their pension funds

So let’s break out the steps below.

Various cities see a push by public teacher unions for remote schooling again

Here is some recent coverage:

Yes, there’s obviously a political problem for the Democratic Party as most of the places where this is going on are areas that have Democrats as governors, mayors, legislators, at all levels. Heck, there isn’t even Trump as President anymore, so who outside of the party can they blame now?

Given that about 50% of local/state employees are K-12 teachers (full-time equivalents), it doesn’t matter if the teachers are in a union or not. They’ll have power if they feel they have a concentrated interest.

Now, in my own school district, the teachers and administration have really concentrated on being most effective with the students while keeping people as safe as reasonably possible. In various states, counties, and cities across the country, various adaptations are being followed for quarantining, testing, and more. We’ve had spring 2020, the full 2020-2021 school year, and the fall 2021 semester to work all this out.

So, given various places have made a variety of accommodations, and especially since omicron doesn’t seem as deadly as delta, the current reaction didn’t have to be such a disaster in places like Chicago and New York City. The Democrats realize how this is setting up for all sorts of electoral pain for fall 2022, just to add to the pile of everything else going wrong.

But that’s just a short-term issue. The ups and downs of the electoral cycle should be standard fare to the political party animals. In some of these cities, it’s not like they have to worry about any Republicans stepping in, just having a primary challenger, as happened in New York City.

However, what happens if your tax revenue base completely erodes?

Teacher pensions: expensive because of reality

Pre-pandemic, I had done some posts where I noted that teacher pensions, specifically, were a big problem group among public pensions.

Here is a key post in that series from 2019: Teacher Pensions: A Big Problem for Many States.

In that post, I pointed out three big issues with public teacher pensions:

  • Teachers constitute the largest category of public employees (approximately 50%)
  • Teachers tend to live longer than not only the general public but also all the other categories of public employees
  • The ways these pension plans have been funded have created bad incentives, and are grossly underfunded due to explicit funding policies

In short: teacher pensions are expensive, because of reality.

Several crazy money-printing bills from the federal government under both Trump and Biden have hidden some of these issues for a couple of years, but the problem is long-term. The short-term contributions needed in 2020 and 2021 are nothing compared to the long-term costs.

As noted above, in some places, public teacher unions are ticking off their employers (that is: taxpayers and voters), and they really need to think about not just their current health as teachers, but the long-term health of their pensions.

Because one of the reasons these teachers’ pensions have been allowed to keep rolling along with this gross underfunding is the huge assumption is that these funds are a going concern.

That is, they are assuming that contributions to these funds are growing and that shortfalls from underfunding in the past can be made up for growing contributions in the future. That assumption can be shaky for reasons the politicians, teachers, and pension accountants did not anticipate.

Such as the tax base moving somewhere else, because nope, employees don’t have to actually live near Chicago, say, to work for a Chicago company, when so many employees have gone remote. And if a working parent in the Chicago area finds they can’t even attend work Zoom meetings regularly, because they have to help their kids with online education that doesn’t seem to do much… said parent may think moving to Tallahassee is sounding pretty sweet, even if they might get chased by a gator at some point.

The Census tells of the winners and losers in 2021

Still focusing on the short-term, the Census Bureau did an estimate of how the U.S. population changed between April 21, 2020 (the decennial census date) and July 1, 2021.

In general, the population doesn’t change much year-over-year.

Except a lot changed between April 1, 2020 and July 1, 2021. For one, there were a lot more deaths than usual. As well, there were a lot more people moving around than usual.

Mark J. Perry at AEI looked at the top inbound & outbound states:

By the way, he did those top ten/bottom ten inbound/outbound based on total number of people. I decided to “normalize” it based on percentage of people who migrated, which gives similar results. To make it so you can compare against Mark J. Perry’s graph, here are just the top ten and bottom ten:

This ranking obviously gives a different picture, as larger states will have less impact… usually. For inbound net migration, we see a lot of small states ranking high, but Florida, one of the most populous states already, sees a fairly high migration rate.

Similarly, New York state is a high population state, but sees a high net migration outbound.

Unsurprisingly, DC took a big hit between 2020 and 2021, not just due to Trump folks getting booted (not that I really think any of them set down roots in DC to begin with), but given lockdowns and the reduced opportunity to schmooze, if you’re going to have to lobby at a distance, you may as well live somewhere a lot cheaper than DC to do it.

Also, some people may have just gotten fed up with DC in general.

All that said, let’s look at the whole country using a tile grid map:

[Yes, I know the tile grid map has weird relationships between the states/locations. The U.S., especially the East Coast, doesn’t work well as squares, especially if you shove DC in there.]

Given this, it’s very interesting to see, on a percentage basis, where people are going. There are the relatively low-population western states with high inbound rates: Idaho, Montana, Nevada, Utah, and Arizona. It’s very easy to pump up net migration scores given their low populations, but also people may have been drawn to the low population density of those states in a lockdown time. If you’re working remotely, and you don’t want to feel cramped in a little box in NYC or DC, why not go to Montana?

Delaware, New Hampshire, and Maine are also low population places, so fairly easy to move the needle.

Then there’s the southern trio: Tennessee and the Carolinas. All three states had seen a lot of growth before the pandemic, and I’m sure their pleasant climate, as well as more congenial tax situation, were draws.

Then Florida. Boy howdy. It’s a huge state in geography and population, and a lot of people moved there.

And it seems they may have come from New York and California, which saw considerable percentages of their population leave.

To be sure, NY and California have been bleeding people in net migration before the pandemic.

Note, I didn’t even go to the length of measuring how these states did when it came to deaths and births, and both California and New York had some bad experience there. Florida didn’t have its really bad death experience until fall 2021, which is after this population migration measure.

Old posts on losing tax base

This is an old argument that has come up many times before. So let me dig up a few times I addressed it.

January 2020: Are People Moving Due to Taxes?

February 2020: Do It Yourself Tax Migration Stats

May 2018: Our Clever Ideas are Totally Going to Work! Please Billionaires, Don’t Leave!

April 2018: Trying to Escape Property Taxes, Follow-the-Leader, More Married Couple TCJA Scenarios

October 2017: Illinois: Be Seein Ya!

Whether it was trying to keep a handful of billionaires in place in Connecticut or watching Puerto Rico’s population crater, we have seen the devastation that comes from tax revenue erosion just from taxpayers moving somewhere else.

And now that employment is getting decoupled from location, at least for certain professions in a stronger way, certain people will no longer feel the need of being tied to “prestige” locations such as NYC, DC, Chicago, or San Francisco.

Especially if there’s no longer much prestige to be had in those locations.

Detroit used to be a prestigious location.

Look what happened to it.

Why do people live in high-tax locations?

I can answer for myself, as I live in one of the highest-tax areas in the U.S. In my location, I am getting services for the taxes I pay. I pay out the wazoo for services, and I expect to get service for said out-the-wazoo amounts being paid.

This is an old graph, but the proportions hold up for pre-pandemic times, in terms of employee count:

About half of full-time equivalents of state and local government employees throughout the U.S. (in 2014) were K-12 education people. Another 15% were higher education. Education is a huge component of U.S. state and local government services.

And in some locations, people are seeing that they’re essentially getting nothing of value in education. In these places, vouchers aren’t on offer or charter schools, usually, so sometimes they just withdraw their kids entirely from the public school system, or move somewhere else, where they can get value from the local public schools.

In many of the same cities where taxpayers notice that little K-12 education is going on, they’ve noticed that policing, or at least prosecution of crimes, has also been obliterated.

What, exactly, are they paying taxes for? Garbage pick-up? Could they get a discount on our taxes, then?

As for me, I’m still getting what I am paying for. My local school district has been doing a great job balancing the risks, in my opinion, and has demonstrated they know that the students really need to be in school in person when possible.

I’m not the one moving to Florida or Texas (yet) because I think local public employee unions have over-reached.

However, I think the teachers’ unions in various places do need to think about their long-term strategies, or they may find that they may go the way of the private sector unions as well, with their pensions along with them.

Once you’re at the point where you’re shouting that the pension promises were guaranteed, to taxpayers that left decades before, well, look to Detroit.

That’s the good version of what can happen.

You don’t want to see the bad version.

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