The Incredible Shrinking Kentucky Teacher Pension
The Bluegrass State is struggling to keep up with teacher pay, too
A pension - a defined benefit paid to someone after working for an organization for a period of time - is a thing of the past for many in the workforce. This benefit - a monthly payment based on salary earned and years of service - was once the norm for more than a third of working individuals. Put in your time (usually around 30 years) and you get the pension. You could “vest” - meaning you’d qualify for at least some benefit - after five years (or more, depending on the plan).
Now, pensions are typically only a benefit for public sector employees. Police officers, firefighters, and teachers, for example.
In fact, pensions are a key selling point for educators - while the annual salary may be lower than similarly-educated peers, the long-term benefit of a pension is supposed to make up for that. It also provides an incentive for individuals to remain in the field.
As a result, pensions are sometimes called “golden handcuffs” - a way to keep people who might leave strapped to a job. In fact, in states like Tennessee and Alabama, teachers are being allowed to retire, access a portion of their pension, and teach full-time and earn that salary, too.
These states are using funds held in pensions to help address their teacher shortages - keeping teachers who might otherwise retire in the field for a few more years.
All of which brings me to an unfortunate story out of Kentucky. For many years, Kentucky was a leader in the Southeast in teacher pay and also provided retiring teachers with a generous pension benefit.
In recent years, thanks to a GOP Supermajority in the legislature, teacher salaries in Kentucky have slipped and teacher pension changes mean retired teachers earn less than they did just a few years ago.
The Kentucky Center for Economic Policy breaks it down:
On the contrary, the pensions that retired Kentucky teachers receive are getting smaller after taking inflation into account. The major reasons for this decline include:
Pensions are based on the final average salary of teachers in the years before they retire. As salaries have declined, pension benefit levels have declined with them.
The annual benefit increase given to retired teachers each year to keep up with the rising cost of living (known as a cost of living adjustment, or COLA) is significantly lower than recent rates of inflation, eroding the purchasing power of pensions even further.
The value of pensions will decline even more in the future due to a series of reductions made by the legislature in how benefits are calculated.
KCEP goes on to note:
Newly retired, full-career employees who work between 25 and 29.99 years (by far the most common group of retirees) had their highest benefits in 2016 in current dollars, but new retirees in 2024 with the same years of service had benefits that were worth $8,564 less, or a 14% decline. This reduction reflects the erosion of final average salaries used to calculate benefits, which fell by an inflation-adjusted 15% during that time.
And, even as the state faces a teacher shortage, overall salaries have declined and Kentucky is no longer at the top of Southeastern rankings when it comes to teacher pay:
Kentucky has fallen to 42nd among states in teacher salaries, and the average district is paying its teachers 20% less than it was before the Great Recession after adjusting for inflation. Inadequate pay is contributing to a growing teacher shortage across the commonwealth.
By comparison, average teacher pay in Tennessee is now 38th in the nation - up from 44th just a few years ago.
Gov. Andy Beshear acknowledged the need to boost teacher pay - but the legislature has yet to go along with his request.
Beshear is proposing an 11% raise for all school employees. The proposal would bring starting teacher pay in Kentucky above $44,000/year (above both Tennessee AND Alabama) and move the average teacher salary in the Commonwealth to more than $64,000.
That 2023 proposal did not receive legislative approval - and now, Kentucky teachers are experiencing both low pay AND shrinking pensions.
If the legislature continues to ignore proposals to boost pay while also effectively shrinking pensions, it is likely the teacher shortage will grow worse.
Thank you Andy. Just another example of how Republican legislators do NOT help and benefit the average American worker.
This is heartbreaking. As a retired educator having that pension to look forward to was a reward for sticking it out through all the unnecessary madness.