News & Politics

How the Looming Public Pensions Crisis Could Be a Boon for Religious Schools

How the Looming Public Pensions Crisis Could Be a Boon for Religious Schools
Students from St. Joseph Catholic School wave yellow scarfs during a rally in support of school choice, Tuesday, Jan. 24, 2017, in Austin, Texas. (AP Photo/Eric Gay)

There is much in the news these days about the cumulative underfunding of state and city retirement plans which, according to the Stanford Institute for Policy Research, is now more than $6.7 trillion.  Moody’s has recently calculated the pension hole of all U.S. localities as equal to the world’s fourth-largest economy, Germany.

With a May 2018 report from Harvard’s Kennedy School of Government showing that public pension funding in New Jersey and Kentucky is already at “high risk of insolvency” and that California, Connecticut, Illinois, and Pennsylvania are not far behind, think tanks both left and right are sounding fiscal alarm bells.  Higher taxes and government service cutbacks will soon be needed, they say, to close the widening gap between promised retirement benefits and dwindling plan assets.

Yet history tells us that no economic crisis ever has a purely economic resolution, as the policy changes designed to preclude its repetition inevitably have broader social consequences. Like every financial reformation before it, the coming effort to prevent another pension hole like the current one will spawn a cultural surprise – in this case, an unexpectedly larger role for Baptist, Lutheran, Catholic, Hebrew, and other parochial schools in K-12 education.

To understand why the looming pension crisis will morph into a parochial school renaissance, we must understand the extent to which public school teachers and especially their unions have contributed to the underfunding problem. It is not simply that educators comprise the single largest block of government employees – 99 percent of all municipal workers, according to the U.S. Census Bureau – but that for over half a century they have successfully organized to pass legislation which, while benefitting themselves financially, has produced a K-12 system that scores “mediocre” at best in global comparisons.

A recent analysis of the ten most recent years of school district finance data by Bellwether Education Partners shows that national spending on benefits for instructional staff has grown by a whopping 24 percent while academically oriented spending grew only 2.6 percent.  Even this lopsided statistic does not account for the growing percentage of time that middle and high school teachers must spend trying to help students compensate for the inadequate education they received during the elementary years.

Because politicians have been unwilling either to demand a more cost-effective school system or to charge taxpayers the full price of failing to do so, the resulting budget overruns have for decades been carried forward in the form of delayed contributions to public employee pension funds, not just those for educators but for police, firemen, and other government workers. The usual justification for this irresponsible practice has been that delinquent pension contributions could be made up in more prosperous times. But the tacit assumption of both the teacher unions and their political allies has always been that taxpayers would remain on the hook for any shortfall, regardless of future economic conditions.

Only now, with private sector workers owing much more to bail out public pensions than they have saved for their own retirements – $71,000 each according to Wharton School economics professor Olivia Mitchell – is it becoming clear just how painful the fiscal reckoning is going to be.  At a recent conference co-sponsored by the Brookings Institution, the Brandeis International Business School, Washington University’s Olin Business School, and the University of Chicago’s Harris Institute of Public Policy, a paper by James Spiotto of Chapman Strategic Advisors documented how every citizen will be sacrificing to cover it, whether directly in the form of new taxes or indirectly though municipal bond defaults and cuts in government benefits.

Americans may not be able to avoid the bill for decades of inefficient schooling but, once forced to pony up, will clearly want a change to the educational status quo, especially as they already have a more attractive alternative.  As far back as 2007, Johns Hopkins University professor Susan Aud studied twelve experimental “school choice” programs in eight states – programs that let parents direct the public funding for their child’s education toward any placement they wish – and found that they had collectively saved “nearly half a billion dollars” over fifteen years.

The reason is no mystery.  In a city like Hartford, Connecticut, where the current public school per pupil of over $19 thousand contrasts with a private school tuition as low as $4 thousand, the annual savings could conceivably reach $320 million.

School choice not only lowers the cost of educating each child but does so in a way that improves academic results. In 2016, University of Arkansas researchers Patrick J. Wolf, M. Danish Shakeel, and Kaitlin P. Anderson released their analysis of school choice programs worldwide, which found superiors results in both reading and math. Giving families more than one educational option tends to “generate achievement outcomes that are as good as or better than traditional public schools,” the scientists found, “but at a fraction of the cost.”

It is this combination of low cost and improved academic performance that explains why voters have increasingly warmed to the idea of school choice, completely independent of the pension crisis.  Today, according to the most recent annual poll by Education Next magazine, 54 percent of Americans support allowing public-school parents “to enroll their children in private schools … with government help to pay the tuition” – a nine-point increase over just last year.

How does all this benefit religion?  Because every time parents are offered the opportunity to utilize private placements, most show a clear preference for parochial schools.

In Indiana, where more than 34,000 children are subsidized to educate their children in non-public settings, a recent EdChoice survey found religion to be the most important factor in selecting a school. A similar study of New Orleans parents who put their children in a state-funded voucher program after the Katrina hurricane revealed that “having religious subject matter inform the curriculum” was a primary factor in their choice of schools.

This preference for placing one’s own children in a parochial school is not hard to understand in the case of strongly religious parents. But research conducted by Sacred Heart University Professor Christel J. Manning suggests that many adults who rarely attend church or who have switched from their birth family’s very traditional upbringing to a more liberal faith are also happy to let religious schools shape’s their kids’ values.

All this is not to suggest that the nation’s two large teacher unions, the National Education Association (NEA) and the American Federation of Teachers (AFT), will be any more willing to surrender their monopolistic grip on K-12 schooling than they were the last time Americans clamored for radical educational reform – in the fall of 1957, when the Soviet Union’s launch of the world’s first satellite exposed disturbing weaknesses in the nation’s math and science curricula. The late economist Milton Friedman had already begun to make a powerful case for empowering parents to pick their children’s schools, and both the NEA and AFT fought hard to convince state legislatures that the existing public system could be improved from within.

But this time voters will be armed with a lot more evidence than their twentieth-century predecessors had, not only about how well school choice works, but about how reliably teacher unions keep their promises of self-reform. After briefly tinkering with a succession of almost comical instructional fads, including “discovery learning” (having children teach themselves) and “open schools” (removing the walls that separated students from teachers and different age groups from each other), neither the NEA or the AFT ever again made even the pretense of trying to improve the effectiveness of American public schools.

If today’s voters need any more reason to break up union-dominated school monopolies, they’ll only have to consider the extent to which their coming bill for underfunded retirement benefits has been needlessly inflated by efforts to hide the problem. In October 2016, the Manhattan Institute’s Josh McGee published a study of school spending showing hat local districts nationwide had been quietly disguising the impact of delinquent pension contributions for nearly two decades. According to a Stanford University study, California voters have been shielded from the fact that teacher pension costs have swelled by 532 percent over the last 15 years, while instructional outlays grew by only 47 percent.

In coming years, Americans will be asked to pay an enormous price for having so long subsidizing an inefficient K-12 school system with deferred public pension contributions. But as they predictably turn to school choice to prevent such a financial shock from ever recurring, demand for parochial school placements will soar. While today’s Christian denominations consider various ways to keep their faiths vital in what seems like an increasingly secular society, they should not overlook the unexpected opportunities presented by the looming revolution in education.