Cross-subsidization of teacher pension benefits: the impact of the discount rate

Costrell, Robert M.

doi:10.1017/s1474747218000239

Cited by 8 publications

(11 citation statements)

References 18 publications

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“…The above results find some cost savings as a result of the switch to a four-day school week, but tell very little about the dynamics of these savings. To answer questions regarding how quickly these cost savings are realized and whether they accumulate or ameliorate over time, I estimate the event study specification outlined in equation (2). These results are presented in Figure 2 and show that the parallel trends assumption generally holds after controlling for school district-specific time trends, as evidenced by the lack of statistically significant pre-trend in these outcome variables.…”

Section: Event Study Resultsmentioning

confidence: 99%

“…Further exacerbating the financial problems, expenditures have been rising in many school districts. Most notably, employee benefits increased by 22 percent between 2005-2014 (Machitello, 2018) and pension/retirement costs have increased from 4.8 percent of total per pupil expenditures in 2004 to 10.6 percent of total expenditures in 2018 (Costrell, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Does a Day Lost Equal Dollars Saved? The Effects of Four-Day School Weeks on School District Expenditures

Thompson¹

2021

National Tax Journal

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Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

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Section: Event Study Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does a Day Lost Equal Dollars Saved? The Effects of Four-Day School Weeks on School District Expenditures

Thompson¹

2021

National Tax Journal

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“…Many school districts have faced increased financial pressures following the Great Recession due in part to stagnant or decreasing local property tax revenue, slowly recovering state foundation aid in many states (Leachman Masterson, and Figueroa 2017), and increasing expenditures (Marchitello 2018;Costrell 2020). While some states have developed financial intervention systems to help school districts navigate these financial pressures, school districts have traditionally dealt with financial pressures by laying off teachers and administrators, increasing class sizes, closing or consolidating schools, implementing student activity fees, and/or implementing alternative school schedules.…”

Section: <A> 1 Introductionmentioning

confidence: 99%

Are All Four-Day School Weeks Created Equal? A National Assessment of Four-Day School Week Policy Adoption and Implementation

Thompson

Gunter

Schuna

et al. 2021

Education Finance and Policy

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Four-day school weeks are used in over 1,600 schools across 24 states, but little is known about adoption and implementation of these types of school calendars. Through examinations of school calendars and correspondence with school districts, we have compiled the most complete four-day school week dataset to date. We use this unique database to conduct a comprehensive analysis of four-day school week policy adoption and implementation. We find adoption of four-day school weeks is often financially-motivated and has generally remained a small, rural district phenomenon. These schedules feature a day off once a week – often Friday – with increased time in school on each of the remaining four school days that, on average, is nearly an hour longer than the national average among five-day schools. Four-day school week schedules average only 148 yearly school days, yielding yearly time in school that is below the national average for five-day schools despite the longer school days. Substantial heterogeneity exists in the structure of these schedules across states, which may help explain differential four-day school week effects on student outcomes across institutional settings in the previous literature.

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“…I then turn to the full cost under each plan, including the off-the-books cost of riskthe value of the pension guarantee. I will depict the distribution of individual values of the pension guarantee under Kansas' FAS plan, using the method of Costrell (2020), and compare it with the CB plan. Although the main reason for the lower cost under Kansas' CB plan has been summarized above, I will explain the significance of some pertinent actuarial details in the plan's implementation.…”

Section: <A>1 Introduction and Summarymentioning

confidence: 99%

Reforming Teacher Pension Plans: The Case of Kansas, the First Teacher Cash Balance Plan

Costrell

2022

Education Finance and Policy

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The ongoing crisis in teacher pension funding has led states to consider various reforms in plan design, to replace the traditional benefit formulas, based on years of service and final average salary (FAS). One such design is a cash balance (CB) plan, long deployed in the private sector, and increasingly considered, but rarely yet adopted for teachers. Such plans are structured with individual 401(k)-type retirement accounts, but with guaranteed returns. In this paper I examine how the nation's first CB plan for teachers, in Kansas, has played out for system costs, and the level and distribution of individual benefits, compared to the FAS plan it replaced. My key findings are: (1) employer-funded benefits were modestly reduced, despite the surface appearance of more generous employer contribution matches; (2) more importantly, the cost of the pension guarantee, which is off-the-books under standard actuarial accounting, was reduced quite substantially. In addition, benefits are more equitably distributed between short termers and career teachers than under the back-loaded structure of benefits characteristic of FAS plans. The key to the plan's cost reduction is that the guaranteed return approximates a low-risk market return, considerably lower than the assumed return on risky assets.

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Cross-subsidization of teacher pension benefits: the impact of the discount rate

Cited by 8 publications

References 18 publications

Does a Day Lost Equal Dollars Saved? The Effects of Four-Day School Weeks on School District Expenditures

Does a Day Lost Equal Dollars Saved? The Effects of Four-Day School Weeks on School District Expenditures

Are All Four-Day School Weeks Created Equal? A National Assessment of Four-Day School Week Policy Adoption and Implementation

Reforming Teacher Pension Plans: The Case of Kansas, the First Teacher Cash Balance Plan

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