03/28/2024

Union dues are cutting into teacher’s retirement funds

Union dues take a large bite out of the paychecks of California teachers. We estimate that newly hired, full-time teachers will pay $37,000 in dues over a 30-year career. Further, if new teachers could fully opt out of the union and instead save their dues in an Individual Retirement Account, they would each have $228,000 extra in after-tax retirement savings.

We base these findings on union dues information posted by the Glendale Teachers Association (GTA), which we believe are typical for the rest of the state. The GTA is affiliated with the California Teacher’s Association (CTA), which, in turn, is affiliated with the National Education Association (NEA) – so a new teacher in the Glendale system is effectively joining three unions at once. For the most recent school year, 2016-2017, full-time teachers subject to Category 1 union dues, paid $229 to the Glendale Teacher’s Association, $656 to the California Teacher’s Association, and $187 to the National Education Association – an annual total of $1,072 in union dues.

Now let’s consider a hypothetical teacher that began his or her career in August 2016. If we assume that union dues grow at a rate of 1% annually, this teacher would end up spending just over $37,000 in union dues by 2045. Union dues increased by 1.8% from the 2015-2016 to the 2016-2017 school years. Therefore, using a 1% growth rate in our calculations is a conservative estimate to account for any periods when union dues do not increase.

Now let’s consider an alternative use for this $37,000. How much could that teacher have earned if he or she had been able to invest that money in a retirement account? An account earning 7.25% annually (the rate of return currently assumed by CalSTRS) would have provided this teacher with $304,000 by 2045. Even if we assume this teacher would be subject to a 25% tax rate on this investment, the fund would still provide $228,000 for retirement.

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