Public Schools and Their Pensions: How Is Pension Spending Affecting U.S. School Districts?

Abstract

Abstract State and local government decisions about how school funding is raised and allocated have profound impacts on American public education, and in recent years, experts have documented large increases in one type of spending in particular: public pensions. Because most data on school district pension expenditures are at the state level, it has so far been difficult to assess what changes local school districts have made in response. In this article, I analyze a new dataset of the annual pension expenditures of approximately 200 unified school districts across the United States from 2005 to 2016. Consistent with findings in the literature, I find that pension expenditures rose in real terms in most of them, but also that there has been significant variation in that growth. Moreover, in a descriptive analysis, I find that larger within-district pension expenditure growth is associated with 1) greater revenue growth in the subsequent year and 2) reductions in school district employment, mainly through reductions in the number of non-teaching staff. Finally, there is evidence that districts' responses to rising pension expenditures may depend on state political institutions, in particular whether the states have mandatory collective bargaining for teachers.