Proposed teacher retirement changes said to cut pension shortfall -
Published Thursday, February 7, 2013 at 1:00 am / Updated at 7:10 am
Proposed teacher retirement changes said to cut pension shortfall

LINCOLN — Future schoolteachers in Nebraska would lose some retirement benefits, and current teachers would be required to keep paying more toward their retirement under proposals considered Wednesday.

The changes are designed to trim a $108 million, two-year gap in state pension funding.

The gap, caused by the stock market plunge from 2008 to early 2009, would be reduced to about $20 million a year under the two proposals, Legislative Bills 553 and 554.

The bills were the result of negotiations with the major state education groups. Those talks were led by State Sen. Jeremy Nordquist of Omaha, chairman of the Legislature's Retirement Committee.

During a public hearing Wednesday, representatives of teachers, administrators and school boards said they realize that the state is facing a pension shortfall. Even though the shortfall is smaller than in other states, they said that something needed to be done.

“We believe that LB 553 is a balanced approach,” said Jason Hayes, a representative of the Nebraska State Education Association.

LB 553 makes changes in the pension plan for teachers, administrators and staff in school districts other than Omaha; LB 554 makes similar changes in the plan for Omaha Public Schools employees.

Under the bills:

» Current teachers would continue to contribute 9.78 percent of their salary to retirement. That rate was supposed to sunset in August and drop to 7.28 percent, which was the rate prior to 2011.

» Keeping the higher employee contribution rates will impact local school districts, because their contribution is 101 percent of what employees pay.

» For teachers employed in the future, the cost-of-living increases for pensions would be capped at 1 percent, rather than the current 2.5 percent for teachers in the state and 1.5 percent for Omaha teachers. The calculation of their retirement wage would be based on an average of five years of pay rather than three years, which would serve to reduce their retirement wages (which are 75 percent of that average wage).

» The state would also increase its contribution to the plans from 1 percent of compensation to 2 percent, which translates into about $20 million a year.

By state law, Nordquist said the state likely would be responsible for the entire $108 million shortfall if the Legislature did nothing.

But, he said, his bills would reduce the shortfall, both in the short and long term, and share the burden among the state, local school districts and teachers.

“These bills strike a balance,” said Nordquist, who was critical of Gov. Dave Heineman for not including a plan of his own to address the pension shortfall in his 2013 budget proposals.

The state senator said his bill also makes an accounting change in how the shortfall is accounted for in the state's pension plans, now projected at $2.2 billion over the next 30 years. That change serves to reduce, in the short term, what is owed.

The average pension payment to state teachers and administrators is $1,760 a month, which Nordquist says shows that retirees under these plans are not “fleecing” taxpayers.

The committee took no action on the two bills following Wednesday's hearing.

Contact the writer: 402-473-9584,

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Contact the writer: Paul Hammel    |   402-473-9584    |  

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