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Governments across the country are facing down at least $1.7 trillion in unpaid pension costs for public workers. As these growing commitments squeeze local budgets and crowd out essential services, taxpayers are being asked to cover a larger bill—and get less in return.
Public education is the largest and potentially the most important sector to be affected by pension crowd-out. Almost every state increased teachers’ retirement benefits in the booming 1990’s, but those increases were not accompanied by responsible funding plans. By 2003 teachers’ plans were short by $235 billion, and by 2009, pension debt had more than doubled to $584 billion.
Market growth since the Great Recession has barely put a dent in the shortfall, which still totals around $500 billion. Carrying such a sizable debt is expensive and has resulted in large cost increases.
These costs inevitably cut into education spending. Between 2000 and 2013, pension contributions per pupil increased at a rate five times higher than total education expenditures. This did little to halt the growth in debt: Pension debt per pupil increased by $9,588 over this period, more than nine times larger than the increase in total annual education expenditures per pupil.