Lost jobs; a leaky classroom ceiling that required 21 buckets; and stapled textbooks rather than the usual hardcover—it’s not just future retirees that will suffer if investment returns from state-sponsored pension plans continue on their downward trajectory.
Economists have warned that the U.S. faces a $1 trillion pension shortfall due to an aging population and tight state budget. But in places such as Erie, Pa., schools are the first to feel the squeeze. As pension costs have tripled in the past five years, states have struggled to find somewhere in the budget to make up the difference between what they have promised to future retirees, and what the books are showing. Schools are the one of the first institutions to feel the hit, the Wall Street Journal reported.
A second-grade classroom in Erie needed 21 buckets to catch leaks following a snowstorm two years ago. In the last five years, 20% of jobs have been cut in the district, three schools have been closed, the Journal reported.
That comes as long-term investment returns from U.S. public pensions have hit their lowest point in more than a decade and a half, according to Wilshire Trust Universe Comparison Service.
Over the past few years, public pensions including California Public Employee’s Retirement System (CalPERs) and California State Teacher’s Retirement System (Calstrs)—the largest in the country by assets—have posting mediocre returns due to low interest rates and growing retirement obligations. Calpers slashed its 20-year return targets to 7.03% while Calstrs cut its rate to 7.1%