How Teachers’ Unions Capture Increased Public-School Funding

I n Albany, Boston, Lansing, and many other state capitals across the country, governors are proposing “historic” annual increases in public-education funding, as they do almost every year. What none of them will tell parents and taxpayers, however, is that a huge portion of that funding will never reach the classroom.

Instead, thanks to powerful teachers’ unions that lobby for unsustainable benefits packages, money meant for students and teachers’ paychecks is funneled into pensions liabilities. The Equable Institute, a nonpartisan public-pension-research group, calls this phenomenon “hidden funding cuts.” That it can be credibly dubbed “hidden” is astonishing considering that K–12 employee-pension debt nationally nearly equals the GDP of Saudi Arabia.

Take Pennsylvania, for example, where total K–12 education funding is the sixth highest nationally, according to a Reason Foundation study of 2020 data. Real per student revenues have risen 50 percent since 2002 despite a 12 percent decline in enrollment. In fiscal year 2020, state, federal, and local funding amounted to more than $21,500 per student, well above the national average. And yet, in February, a judge ruled that the state’s education-funding system violated the Pennsylvania constitution’s education clause and the U.S. Constitution’s equal-protection clause because some school districts in the state lacked resources compared with others.

“On a statewide basis, pension increases greatly outstripped any increases to BEF [Basic Education Funding] and nearly equaled every inflation-adjusted dollar appropriated to the state’s education line item,” Matthew Kelly of Penn State University had testified during the lawsuit, filed by several Pennsylvania school districts against the state’s department of education.

Indeed, school districts in poorer areas of the state often end up with much less than districts in wealthier areas. And that’s despite the fact that the districts in the poorest quintile receive more than twice the state-level funding as those in the wealthiest quintile, thanks to the state’s “fair-funding formula.”

Exorbitant property taxes in wealthy localities explain part of the difference. A legal quirk called “hold harmless” that prohibits moving state funding from districts with declining enrollment to those with increasing enrollment explains part of the disparity, also. However, a major part of the problem, which is often ignored, is teachers’ pensions.

Despite helpful reforms enacted in 2017, the Pennsylvania teachers’ pension system, known as PSERS, is a funding black hole and will likely be so for decades. In 2020, contributions towards the operational costs of PSERS and its $44 billion unfunded liability were $5.8 billion. That was equal to 45 percent of Pennsylvania’s 2020 state-level education funding. If not for exorbitant pension costs, much of that money might have gone to poorer school districts such as the ones that filed the lawsuit against the state’s education-funding system.

How did it come to this?

In 2000 and 2001, when PSERS had a funding surplus, government unions lobbied for and received a notable increase in pension benefits for both current and past employees. A Democratic legislative aide told the Pittsburgh Post-Gazette at the time that it was “not a raid on any taxpayer money.” That statement was false.

The surplus quickly turned into an unfunded liability that ballooned beyond $15 billion by 2010. State Democrats then passed a law capping payments to the pension system to temporarily ease the pain. A spokeswoman for Democratic state representative Dwight Evans, now a U.S. congressman, said the move “solve[s] the financial crisis the pension system is facing in the short term and establishes reforms that will help save money in the long term.” This statement was also false.

The unfunded liability of PSERS has since tripled, making it the nation’s fastest-growing hidden education-funding cut. Nevertheless, Pennsylvania Democrats are now pitching another pension-benefits hike while simultaneously claiming that schools are “underfunded” and planning to take billions more from taxpayers to satisfy the February court ruling that found the current education-funding system unconstitutional.

This trend is observable in other states with strong teachers’ unions and high education budgets, such as Connecticut, New Jersey, and Illinois. Illinois residents, for example, pay the second-highest property-tax rates nationally to fund K–12 education, while 39 percent of that government revenue goes to the pension system. More tax increases also loom there.

Parents have opened their eyes to the cultural indoctrination pushed in public schools by teachers’ unions and public-education officials. It’s time to also pay attention to how those schools are funded. The next time a politician or union official says he or she wants to “invest” more in “underfunded” public schools, ask two questions: Whose fault is it that some schools lack resources to begin with, and what portion of additional funding is likely to reach the classroom?