Penalizing Charter-School Teachers

The IRS has a proposed new regulation which would prohibit charter-school teachers from participating in state retirement plans. (At present, all of the states which authorize charter schools permit, and in some cases require, the charter-school teachers to participate in these plans.) Furthermore, the new regulation would apparently apply retroactively and would cause the teachers to lose the state contributions to their accounts which have been accrued, and on which they were no doubt relying, unless they give up their employment. More here.

Today, February 6, is the last day for public comments on this issue under IRS procedures.

16 thoughts on “Penalizing Charter-School Teachers”

  1. Why would they propose that – other than the teacher’s union suggesting it?

    Out here the teacher’s union hates charter schools.

    Makes them look bad it seems.

  2. This is roughly analogous to: a corporation which has an old-line core business and a more flexible venture business unit, and which edicts that employees of the venture business are no longer covered by the company pension plan AND if they stay there they will lose PREVIOUS employer contributions to their pensions.

    No one would ever do that unless they wanted to destroy the venture business.

  3. It’s part of one of the Obama administration’s campaigns against class enemies. Other campaigns have involved trying to block Boeing from opening a new factory in a right-to-work state, trying to shut down domestic energy production, and trying to gin up political support for gun bans by sending guns to Mexican gangsters.

  4. ..and the only ones who want to destroy it are the teacher’s unions … certainly not the parents.

    In my town an old historic high school became a charter school against the bitter opposition of the teacher’s union.

    But – to my premise – how could a union influence the IRS? Unless the IRS has union sympathizers who listen to the NEA.

  5. BTW reminds me of a teacher in – of all places – Chicago – Mavis Collins – who became so fed up with the public school system she started teaching ghetto children in her home. Tuition was an “whatever you can afford” model – – and in short time young children were reading Thoreau and Shakespeare.

  6. It is *possible* that this rule is the effect of some entirely theoretical analysis by IRS people about what should and shouldn’t constitute a government job for pension and tax purposes, and that the impact on charter schools is merely a consequence of that analysis, totally unsullied by the Obama administration’s close affinity with the teachers unions and the entire K-12 education establishment.

    But it seems unlikely.

  7. LOL.

    This is not a war on charter teachers, it is part of Wall St.’s war on public pensions, of which teacher’s pensions have some high hundreds of billions of dollars they would like to have control over.

    By dividing classes of teachers and punishing a minority, it is easier to weaken political support for these pension systems among their beneficiaries. in reality, they would like to penalize all teachers financially, not just charter teachers. The latter are simply more politically vulnerable and disorganized targets, who, not being in a union, are much less capable of fighting back.

  8. BTW as a follow up, “The Enemy of my enemy” is not always your friend.

    Teacher’s unions have everything to lose in this situation because it is a wedge against their pension system – that it impedes staffing charter schools in the short term with quality employees (and it will)is irrelevant to the NEA or AFT. If you can get rid of one cohort of teachers from the system using the IRS, you can peel off the rest later.

    The ppl pushing this are no more friends of innovative “mom and pop” local charter operators than they are of public schools (or for that matter, of home schooling). These ppl are betting on a variant of Ed Reform that envisions testing companies and large corporate chains of charter schools acting as government contractors to run public school systems for districts/counties using a poorly paid and non-professional labor pool and lots of automated computer drill, on a captive market.

    Pensions, unions, benefits, charters (as we understand them now), local control, elected school boards, parental choice etc. all need to be eliminated for this form of ed reform to come to pass.

  9. Zen, do you have a link or two supporting that hypothesis?

    Public pensions aren’t maintained in cash under the bed; they’re invested, almost always via Wall Street entities or in some cases venture capital funds. A brokerage focused on individual accounts might do better with individual defined-contribution plans than with investments by pension fund trustees; it’s hard to see how this would be beneficial to someone like Goldman. Different “Wall Street” players often have different motivations.

    If the objective were to force more people out of public pension funds and into individual defined-contribution plans, and make money off same, it would make more sense to allow accrued state contributions to be rolled over into such accounts than to delete them.

  10. The Obama Administration supports school choice and teacher accountability thru its Department of Education, but public school labor activists have been on-message in using paristan/#OWS rhetoric in describing this. So it’s not surprising some flunky in the IRS misconstrued Charters as Enemies of the Administraiton, when they are friends.

    PS. Can you take a look at the HTML of this site? It looks broken in IE9.

  11. I’m giving you my view as someone who watches this issue closely. Penalizing charter teachers in this fashion is, in my view, an extremely negative, but calculated move. I’m totally against it.

    “Public pensions aren’t maintained in cash under the bed; they’re invested, almost always via Wall Street entities or in some cases venture capital funds. A brokerage focused on individual accounts might do better with individual defined-contribution plans than with investments by pension fund trustees”

    I can’t speak for every state but my returns on Illinois TRS this year was 4.3 %, over 10 years 6.1 %

    The portfolio is invested in Wall Street and elsewhere by public trustees under statutory requirements – the state pension funds are fairly big and transparent players and they help balance out the market influence of large, opaque SWF, often from unfriendly states, that seek the security and returns of investing in America. By disaggregating all public pension funds – which have regulations and oversight that discourage financial shenanigans – you markedly change power relationships and centralize investment decision-making on Wall Street

    The accounts are being deleted because the intent is to harm their owners.

  12. I would be thrilled to be kicked out a state run pension plan. Most of them (I don’t know about Illinois specifically) are underfunded, based on wildly unrealistic assumptions about future market returns, and vulnerable to political raids. Many of them will be liquidated on unfavorable terms in the not too distant future.

    What you would much rather have is a 401K run by Vanguard or Fidelity or some such entity, where the account is all yours, and you direct the investment.

    I am not sure what is meant about “the teachers to lose the state contributions to their accounts which have been accrued”. If those are vested contributions, there would be a 5th amendment issue. If the contributions have not vested, well life is short, eat desert first.

  13. Whether the 5th amendment would apply or not would hinge partly on whether the pension contributions would be considered to be “property.” It would seem logical that they would, but courts have specifically held that individuals have NO property rights in Social Security benefits.

  14. The Loudermill case would seem to bring this type of issue into the 5th amendment. I think that simple pecuniary rights are less fraught than employment terminations explicitly covered by Loudermill.

    Social Security as a creature of Congress is a special case. Furthermore, I am not sure that Social Security would be exempt if a small class of persons were being excluded from vested rights as opposed to general legislation which affects everyone.

  15. I agree with Robert that this may be a blessing in disguise. My kids went to religious-affiliated private schools. I have five so most went to Episcopal schools, the rest to Catholic. The schools have pension plans but I don’t know the details. The one school, in San Juan Capistrano is very wealthy, and I suspect the teachers are well taken care of. The Catholic high school that two of them went to looks like a college campus. Another went to an Episcopal high school that had 25 students in his graduating class. Orange County has allegedly excellent schools but, when I was interviewing applicants to UCI medical school, one student told me that, if she had not taken all AP classes, she would never have gotten into UC Berkley.

    Public schools, even in affluent suburbs, are a fraud.

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