This week, teachers’ unions continued their battle over mandatory “agency fees” in the Supreme Court case Friedrichs v. California. Union dues cover the costs of lobbying and collective bargaining and are crucial to advocating for employee benefits, including teacher pensions. Add these fees on top of a teacher’s mandatory state pension contributions, though, and it becomes apparent that teachers are spending a substantial chunk of their paychecks on pensions—without receiving much in return.
Take for example, a California teacher’s paycheck. California teachers are required to pay a mandatory state pension contribution of 8.15 percent, soon to rise to either 9.205 or 10.25 percent in the next few years depending on a teacher’s hire date. Alongside pension contributions, teachers contribute a portion of their salary toward union dues. About a third (the amount varies depending on the school district) goes toward political and legislative advocacy. (In 2013, the California Teachers’ Association spent a year of political and legislative action preventing harsher cuts from a recent pension reform law.) The remaining two-thirds of dues, or the mandatory agency fee, covers the cost of collective bargaining. Collective bargaining indirectly impacts pension benefits through negotiations like late-career salary raises that can spike pension benefits for certain teachers. California’s mandatory agency fees make up roughly 2 percent of a new teacher’s pay, according to the Friedrichs complaint.
Put these fees together with the state’s mandatory pension contributions to the California State Teachers’ Retirement System (CalSTRS) and teachers are putting away over 10 percent of their annual salary toward pensions: either directly to the state system through employee contributions or indirectly toward union initiatives centered on maintaining the current benefits structure.
That’s a handsome amount of cash for a system that unfortunately doesn’t benefit the majority of teachers. In California, a new twenty-five-year old teacher must work for at least twenty-two years before her future pension benefits will be more than the value of her contributions. If she leaves before twenty-two years, she won’t break even on her contributions. Over half of California’s new teachers will leave before this break-even point.
To be clear, First Amendment rights, which the Friedrichs case turns on, are not at issue for pension contributions. But teachers can currently choose to opt out of at least a portion of union dues. Pension contributions, on the other hand, are determined by state legislatures, and there’s no opting out. California has accrued unpaid teacher pension debts totaling $74 billion, and many other states also face significant underfunding. That debt must be paid, and it will be the teachers of tomorrow who eventually shoulder the cost in the form of decreased benefits and increasing contributions.
For now, teachers will continue to give up a growing portion of their paychecks toward pensions without much in return.
Leslie Kan is a pensions analyst at Bellwether Education Partners.