A new book, "The Teacher Unions," includes some provocative assertions on the investments of teacher pension funds. Myron Lieberman, the author, contends, for one, the "rate of return on teacher retirement funds is inversely related to the proportion of elected teacher members."
In his book, newly published by The Free Press, New York, he describes the wide-ranging power and influence of the National Education Association and the American Federation of Teachers and the consequences to education, taxpayers and teachers themselves that have developed.
A few pages of the 305-page book - which deals mainly with broader issues involving teachers, unions and education - delve into pension fund matters. Mr. Lieberman contends "the largest source of funds utilized to support union objectives . . . (is) the state retirement funds that included teachers." These funds had $883 billion in assets in 1995, he writes, citing the NEA.
The author, now a senior research scholar at the Social Philosophy and Policy Center at Bowling Green State University, was a chief negotiator of union contracts for school districts in six states, from New York to California. He also was a consultant to both the NEA and the AFT.
A resolution adopted at the NEA convention last year "states that retirement boards should cast their vote as stockholders 'by electing to corporate boards members and/or representatives who support public education.'*" The NEA/AFT objective, he continues, "is to have the retirement boards divest or not buy stocks in companies involved in privatization (of education and related services)."
"The state teacher unions exercise varying degrees of control over how these (pension) assets are invested," he writes. Usually the boards include teachers elected by the pension plan participants. Candidates supported by the teacher unions typically win election, Mr. Lieberman writes, because "no other group has the interest or the access to the membership."
Pensions funds whose boards are dominated by teacher-union representatives place union objectives, such as social investing, above rate of return in determining investment policies. "Unquestionably, social investing results in a lower rate of return on investments, since the pension fund is forced to restrict its options."
As he notes, many public teacher pension plans are underfunded. Yet the unions sought policies that fail to maximize investment return.
But much of the blame for the underfunding and poor performance at these plans lies with laws governing state pension funds.
Teacher retirement funds in Indiana and West Virginia were confined to government-issued fixed-income investments. Last year, the constitutional prohibition on equities was lifted in Indiana by a referendum. In Illinois, the state has shortchanged its contributions to fund public teacher pension plans.
Mr. Lieberman's book only touches on teacher pension issues, trying to include them in the broad context of union activism. In raising such serious issues - especially on underfunding and investment underperformance - he should have provided more information, such as a listing of some of the egregious funds. Fortunately, he cites sources for the assertions. A reader whose interest is thus whetted at least can check them out.
