I think more than a few districts nationally are already moving to 401ks like private industry is, but paying now is a bitter pill to swallow. And how do you convert existing pensions to a 401k when the money doesn’t really exist?

It doesn't make sense to do that. You grandfather in the existing pensions, and switch the incoming teachers to a 401K.

That means your pension costs don't go down for 30+ years meanwhile your 401k costs keep rising with everyone you add to the 401k system.

The only way to switch is to put more money aside than you 'need' so you have a pool of money to pay for each teachers pension on the day they retire. At that point you can then swap new teachers to 401k's without added costs.

But at that point you understand pensions when fully funded actually cost less than 401k's, assuming similar investments. Because 401k's end up with some dead people having large surplus's and pensions don't.

> But at that point you understand pensions when fully funded actually cost less than 401k's, assuming similar investments. Because 401k's end up with some dead people having large surplus's and pensions don't.

a) 401(k) and 503(b) plans are expensed and accounted for in the present. You may have the best actuaries in the world but if your current pension-expecting workers beat the odds you're in a world of hurt, even without over-promising and under-funding pension benefits. (No less than Warren Buffett himself famously warned of this problem back in the 1970s, and if there's one thing Buffett knows it's risk assessment and insurance.)

b) 401(k)s are only more expensive than pensions assuming everyone retires at the same age and gets the same benefit on retirement between the two investments. However, as is common, pension retirement age can be as low as age 50. Paying out those pension benefits for those extra 10-15 years (vs. retiring at age 60-65 for 401(k)) probably adds up to paying more for pensions than 401(k)s, especially given that some employees can apparently goose their pension eggs by working overtime in the last few years of employment.

A) The problem is not that this is hard, the problem is their are incentives to get it wrong. If you accept saving to much is a net benefit as it reduces future spending, then you can operate very safely.

B) This just comes down to discounting the pension properly or limiting retirement age to 65.

In the real world doing pensions correctly has not worked out. My point is simply they have an innate mathematical advantage not that it's directly applicable.

In a way they are screwed. The pension system like social security is a pyramid scheme.

But didn’t the private sector basically contribute the value of the pension to the 401K using some type of present value calculation?

I know this discussion is focus on California, but for context this is not true in all states. Yes, many states have extremely underfunded pensions (Illinois sounds like a disaster) but others (like neighboring Wisconsin) are fully/nearly fully funded.

Can you explain why you think that pensions and social security are Pyramid schemes. I view them more like insurance, but maybe you have an insight that I don't have.

A social insurance system, in which one generation pays for the previous generation, begins to look more like a pyramid scheme when demographics shift and benefits aren't adjustable downward.

Current social security taxes go to pay current beneficiaries and any surplus is spent just like any other tax money and the federal government issues IOUs to the SSA. That’s fine as long as thier are enough workers paying taxes to pay beneficiaries. But as the working age population gets smaller and life expectancy gets longer, either the government will have to raise taxes or decrease benefits.

There is one other fix - make immigration easier. But in the current climate, a politician could never suggest that.

I'm not sure there really is a market....

School districts are local so bad schools / poor areas will just suck more, good ones might do ok. Nobody will fill the gap where education is needed but there is no money....

That’s a completely different discussion - at what level should we as a society fund public schools to ensure equal access? At the state level? At the federal level?

It’s so bad in some places that the more affluent parts of a district are trying to break off and form thier own district so they won’t have to fund the poorer parts.

What’s really bad is that California in particular pays the federal government more in taxes than they receive. The new federal tax laws made it even worse.

It’s not fair and I live in a state that sees net inflows of federal tax money.

You said let the market sort it out... there is no market. That seems like the same conversation.

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That isn’t true. In most states, the local district sets their own budget and legislators might provide some additional funding/oversights. Prop 13 in California gave state legislators more power (since school districts had to rely on less property taxes and more direct state funding) but that is unique to California.

Prop 13 has nothing to do with it, the 1971 California Supreme Court decision mandating statewide equal per-pupil funding is the issue.

While obviously that court decision is unique to California, the broad idea of statewide funding equalization is not a policy that exists only in California, and, in fact, the vast majority of states have most school funding driven by state-set formulas.

How well will a state based funding system work in states like Mississippi?