Unformatted text preview: o work directly for charter schools are considered public employees who must be
enrolled in the appropriate plan. However, if charter schools contract for personnel with an
employment agency, staff are not considered public employees and are left to whatever
arrangements the private agency chooses to make. In Michigan, the exemption of private
contractors from participation in the state retirement system resulted in several schools
switching to management companies.
TABLE 25 Participation of Charter Schools in Teacher Retirement System, 1998-99
District of Columbia
about 25 %
12 of 16
Wisconsin2 Source: Telephone survey of retirement systems.
1 Public school teachers exempted from old-age assistance portion of Social Security. 2 78 Includes Milwaukee. all but one
50 of 141
16 of 57
28 of 31
82 of 87
about 80% Other Financial Issues The actual participation rate of charter schools is shown in Table 25. Florida, Arizona, the
District of Columbia and North Carolina have the lowest participation rates. Reflecting the
high percentage of private management contracts in Michigan, only 50 of 141 charter
schools participate. On the other hand, some states allowing exemptions such as California,
Connecticut, Pennsylvania and Texas experience a high rate of charter school participation
in state retirement systems. Among the states without mandatory charter school inclusion
in state retirement systems, California, Connecticut and Texas are states where public
school teachers participating in the state retirement plan are exempted from the old-age
portion of Social Security. Teachers play key roles in making decisions about retirement
systems in California and Connecticut.
Some evidence indicates that charter schools opt out of state retirement systems for
financial reasons. Exemption from the state retirement system is a frequently mentioned
explanation for the growth of private management contractors in Michigan (Horn and
Miron, 1999; Prince, 1999b). Where charter schools can choose to opt out, the retirement
plan participation rate remains high in states where all public school teachers are exempted
from Social Security by participating in the state teachers retirement plan. On the other
hand, opting out of conventional retirement systems allows charter schools to offer
innovative retirement plans. Individual charter schools may offer more generous employer
contributions. Exemption from the one size fits all statewide plans may lead to retirement
plans that are more appealing to charter school teachers. Innovations could include
portability across state lines, shorter vesting periods and ability to borrow against savings.
Opting out of state retirement systems may lead to financial savings. However, the...
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This note was uploaded on 02/11/2013 for the course ECON 101 taught by Professor Smith during the Spring '09 term at Harvard.
- Spring '09