The Big Pension Problem in Higher Education

Among the many problems American colleges face today, both existential and financial, is one brewing crisis than threatens to really hurt the whole enterprise.

From a piece by Jon Marcus at the Atlantic:

While massive state- and city-pension debts across the country have gotten anxious scrutiny from lawmakers and the public, their effect on public universities and colleges has gone largely unnoticed. But an independent board that oversees state and local accounting standards nationwide has recently put into effect new rules, requiring more disclosure of how much the government owes to universities’ retirees. And these requirements are likely to draw back the curtain on huge liabilities that could drag colleges’ balance sheets—which have been slowly improving since the recession—back into the red.

The problem mirrors that faced by many states (New Jersey, Wisconsin) and cities (Detroit, Chicago); old people are just really expensive. There are budgets that can be controlled by scrimping, cutting back, and raising and lowering taxes from year to year. And then there are pensions and retiree costs, promised in times of plenty and now due at a time when everyone is financially strapped.

The real problem here, the article points out, is that at this point many colleges really do want to do a better job trying bring down costs for students and staff the university with fewer adjuncts, but a balance sheet is a balance sheet.

Facing such burdens, university systems may have to raise tuition even more, and cut more services students need, just to meet these high cuts.

States now face a total of $1.4 trillion in pensions promised. As university-financing expert Jane Wellman said to Marcus, “We’re no longer really funding students. We’re funding benefits.”

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer