California school districts facing cuts due to pension costs
January 23, 2017
California school districts will soon divert billions of dollars from classrooms in order to backfill pensions, education officials say. The skyrocketing pensions costs are expected to eat up much of California’s increased spending on education. [SF Chronicle]
The school district workers whose pensions require the most backfilling are non-certified employees, such as office workers, custodial staff and cafeteria workers. Most non-certified employees are members of the California Public Employees Retirement System (CalPERS), the state’s flagship pension system, whereas teachers and administrators primarily belong to the California State Teachers Retirement System (CalSTRS), the state’s second largest pension system.
Last month, CalPERS decided to lower its discount rate, or projected return on investment, from 7.5 percent to 7.0 percent. The change will be phased in over a period of a few years, but it will cause pension costs to spike for state and local government agencies, including school districts.
State estimates show school districts’ CalPERS contribution costs will likely double within six years.
School district officials say, due to the rising pensions costs, there may be larger class sizes, stagnant worker pay, fewer counselors and librarians and less art and music. Insolvency and state takeover are possibilities for some districts.
“It’s like an OMG moment of, ‘How are we going to cover this?’” said Dennis Meyers, the assistant executive director of governmental relations for the California School Boards Association. “It’s scaring districts right now. A lot are questioning whether they can stay afloat.”
Factoring in CalSTRS as well as CalPERS, rising pensions costs are expected to eat up more than a third of proposed increases to next year’s state education budget. The state education budget is expected to expand by $2 billion next year to $73.5 billion. At the height of the recession in 2011, the budget was $47.3 billion.
All seven cities in San Luis Obispo County are also CalPERS members. They, too, will face rising pension costs as a result of CalPERS lowering its discount rate.
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