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What Are States Hiding?

How much are we spending on education? Actually, far more than we know—because as it turns out, states are hiding some of the teachers’ benefits.

In a new paper, Heritage expert Jason Richwine reveals that “Proper accounting would reveal tens of billions of dollars in extra teacher pension costs, equivalent to somewhere around $1,000 in unreported spending per student.”

That’s right—the real cost of education is far higher than we’ve been told, but it’s not because of extra classroom resources or newer facilities. It’s because of teachers’ pensions.

Richwine explains:

This undercounting occurs because the National Center for Education Statistics (NCES) allows states to define teacher pension costs as whatever school districts happen to contribute to their pension funds each year, rather than the amount needed to pay for future pension benefits.

This is not just an accounting problem—it’s a matter of transparency about the real cost of teacher pensions. Governments routinely contribute less than is needed to cover future pension benefits, but those benefits are guaranteed. That means taxpayers must cover the full costs, sooner or later.

Because pension benefits are guaranteed by state law and often by state constitutions, underfunding pension plans today does not reduce benefits or save money in the long term. It simply delays paying for steadily accruing benefits, forcing future taxpayers to deal with the growing problem.

Thankfully, this transparency problem can be fixed—states and local school districts just have to own up to the real costs of their teacher benefit programs.

Richwine says that “The NCES should revise its data collection procedures to require proper accounting of teacher pension costs, giving taxpayers a more accurate picture of education expenditures.”

Click here to read the full report: Official Education Spending Figures Do Not Incorporate Full Cost of Teacher Pensions

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