Regional Educational Laboratory - Southwest Using Pension Data: the case of Arkansas Presented by: Robert M. Costrell University of Arkansas June 8, 2009 Institute for Education Sciences Washington, DC. Edvance Research, Inc.

Incentive Structure ◦ Pension Wealth Accrual Data to Analyze Labor Market Response ◦ Dept of Education & Teacher Retirement System Raw Tabulations Econometric Analyses Policy Simulations Research Questions (presentation based on joint work with Mike Podgursky, Josh McGee) June 8, 2009Edvance Research, Inc.2 Outline

Pension formulas embed strong incentives ◦ A “pull” to work until reaching pension spike ◦ A “push” to retire shortly thereafter Incentives embedded in wealth accrual ◦ Net present value of discounted benefits ◦ Annual accrual is deferred income from additional year of work Can be calculated from benefit formulas ◦ Eligibility rules for normal & early retirement June 8, 2009Edvance Research, Inc.3 Incentive Structure

June 8, 2009Edvance Research, Inc.4 Annual Accrual in Arkansas The “pull” to the spike The “push”: negative accrual (without T-DROP)

ADE Teacher Longitudinal Files ◦ Can be used to track separations ◦ Teacher characteristics ATRS Pension File Snapshot ◦ Active, inactive, retired ◦ Years of service, DOB, final average salary ◦ Other pension characteristics, esp. DROP ADE-ATRS cooperation in linking files ◦ Identifier replaced to preserve confidentiality June 8, 2009Edvance Research, Inc.5 Data Sets

June 8, 2009Edvance Research, Inc.6 Raw Data on Retirements

June 8, 2009Edvance Research, Inc.7 Econometric Analyses CA: Brown (2006, 2009) PA: Ferguson, Strauss, Vogt (2006) MO: Podgursky, et. al (2009) AR: Costrell & McGee (2009) See NCPI Conference papers. Other states at earlier stage of data acquisition

June 8, 2009Edvance Research, Inc.8 AR Estimation: Linked Data Predicted Separation Probabilities-ATRS Accrual 25-year old entrant

June 8, 2009Edvance Research, Inc.9 AR Policy Simulation (preliminary) Predicted Separation Probabilities-Constant Accrual 25-year old entrant

Differential Labor Market Responses ◦ By demographics (e.g. urban/rural; M/F) ◦ By teaching field (HS/elem; science/math) Policy Simulations ◦ Changes in pension parameters ◦ Changes in pension regime (e.g. cash balance) Fiscal Analyses ◦ Transition costs for policy changes June 8, 2009Edvance Research, Inc.10 Research Questions

June 8, 2009Edvance Research, Inc.11 REL Southwest Forum Educator Staffing, Quality, and Teacher Retirement Benefit Systems Wednesday, July 29, 2009 Omni Dallas Hotel at Park West Dallas, Texas To learn more contact: Kimberly Bruster or