Proposed IRS Rule Bad Charter Medicine, But Hints at Needed Pension Changes

There’s a little controversy trickling out of Washington, D.C., that you may not have heard about. A proposed regulation from the Internal Revenue Service would effectively deem charter school teachers to be private employees and not eligible for government pension benefits. Yesterday the Colorado State Board of Education made the bold and unanimous move of expressing opposition to the proposal, as outlined in a press release:

“This regulation would negatively impact nearly all charter school teachers in the country,” Board Chairman Bob Schaffer said. “In essence this regulation would strip charter schools of their status as government groups when it comes to retirement system participation.

“If that were to happen, teachers at those charter schools who now participate in the Colorado Public Employees Retirement Association would be forced to find jobs elsewhere or forfeit their accrued pension wealth.”

Writing at the Weekly Standard, Joy Pullmann notes the same consequence for charter school teachers nationwide and wonders what the motivation might be:

It’s odd for a government agency to try to strip, rather than enlarge, public-sector benefits. So is this just an oversight, or a sneaky backdoor attempt to please unions piqued at Obama’s pro-charter education policy so far?

Meanwhile, the Manhattan Institute’s Josh Barro takes a different tack in his February 8 Forbes column:

But the regulation also offers us an opportunity to discuss a broader issue: why do charter schools even want to participate in defined-benefit pension plans? As it turns out, they often have good reasons for wanting in—but those have to do more with the dysfunctional structure of the system than with inherent advantages of DB pensions. With a more rational retirement system, many more charter schools would give up DB pensions voluntarily.

Both raise excellent points, noting the inequitable and unjustified short-term devastation the rule would cause while exploring the possibility for a more sound policy through long-term changes. Colorado and other states definitely need to pursue dramatic pension system overhauls like those Barro highlights. But the drastic, selective, and backhanded approach currently under consideration is absolutely the wrong medicine for students and educators who have chosen public charter schools.