Rising teacher pension costs are complicating local school district salary negotiations across the state of California. This year, district contributions will start a steep five-year climb to help offset the anticipated $70.4 billion shortfall in CalSTRS — the California State Teachers’ Retirement System.
Last year school districts paid 8.88 percent (up from the 8.25 percent base rate) of teacher salaries into CalSTRS. That percentage rises to 10.7 this year, 12.6 percent for 2016-17, and more than doubles to 19.1 percent by 2020-21. Teacher contributions will rise a little, from 8 percent over the same five-year period, but will be capped at either 9.2 percent or 10.3 percent, depending on their hiring date. The state’s contribution will rise from 3 percent to about 6 percent.
Future Memory
School District negotiators have to remember when negotiating salaries in the coming months that districts will be paying an additional 1.85 percent increase in STRS benefits for each of the next five years. These annual escalations in STRS/PERS pension costs will drive District pension payments into becoming almost 10% percentof the District’s budget.
LCFF Increases Not Equal
Most inner city school districts with at least 55 percent “high needs” students –those who are English-language learners or receiving subsidized meals –are targeted to receive substantial increases of over 50 percent in supplemental and concentration funding for these students. Meanwhile, middle-class, suburban school districts, like Culver City, will only receive a much smaller supplemental increase.
That means, in districts with less than 55 percent High-Needs students — such as, Culver City (42 percent high needs) –and with the pension payment increases, the LCFF increases in state funding will be much smaller. They may not even make it all the way into the classroom. The state’s promised funding increases may just pass through our District books and go into the employees’ pension funds without even touching a single student.
Non-Rainy Day Raiding
Our District’s own latest five-year cost estimations show that it will be paying, at a minimum, an additional $16.5M in increased STRS/PERS payments over the next five years. The District showed its LCFF projected funding will only increase about $5.5M over the next five years.
This anticipated rise in benefit costs may ultimately swamp the 1 to 2 percent annual revenue increases promised by the governor’s LCFF plan. This would cause our District to have to spend some its reserve fund in order to make its state-mandated payments.
Hold That Line
According to figures released in the district’s 2015-16 Adopted Budget, the state’s LCFF funding accounts for 76 percent of the District’s General Fund Revenue, where the total employee salaries and benefits are almost 80 percent of the District’s projected expenditures.
The District’s minimum $16.5M increase will remain moderate in size and fiscally manageable only if the administration restrains itself from giving District raises over the next five years. If any further District raises are given, it would cause an even greater increase in the District’s statutory pension costs, leading to an even bigger bite out of the District’s budget and/or rainy day-Reserve Fund.
Mr. Laase may be contacted at GMLaase@aol.com
