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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Kaiser Bill

The article omits that the average CalPERS pension is only $1438 a month. The problem is not a retired school district Secretary with her tiny pension. The problem with public pensions, and education in general, is administrative salaries. These administrators make six figures and end up with six figure pensions!


Look at this example, Mary Matakovich, retired from SLO Coastal District, gets a $159K yearly pension!


http://transparentcalifornia.com/pensions/2015/calstrs/mary-matakovich/


The solution is not to do away with CalPERS and STRS but cap the amount someone can get from their pension at a reasonable figure. Say $50,000. After $50K, the administrators should have to invest in 401Ks like everyone else.


Slosum

This “OMG moment” is brought to you by the idiots who think they can generate 8% in a portfolio that hasn’t done so consistently in years. Between the lousy hedge funds and bond investments… it’s only done 5% annualized over the last 10 years. So where do they make up the difference? Steal it from the kids. Education reform here we come!


1965buick

OMG! lol.


SLOBIRD

Please, you can not be surprised about this. Several of us on this site and else where have spouted for years that increase or new taxes are being recreated for the pension plans. The best game in town is this:


The (agency) is current spending (x amount on roads – let’s say $2 million a year). Then the agency says we need to increase sales tax to pay for “increases” in our road maintenance program. Tax is passed, they collect an additional $1.5 million a year in new tax revenue. Now the budget should reflect reflect $3.5 million a year. But oh no. I committee is formed and they designate $1.5 million for road maintenance. Now, the original $2 million is either removed or reduced and that money is used for Pension Payments.


Almost all the government agencies in this State (very few exceptions) are in the hole for millions of dollars. San Luis Obispo has played the game outlined above very well and are transferring about $1 Million a year to their debt plus the current the charges. They keep raising the taxes and finding more fees to pay for this Ponzi Scheme.


Rambunctious

So it’s just like we have always said…the students come in 2nd when compared to the Teachers union. No surprise here. Cut their pension and when they complain tell them too bad it’s the new normal.


kayaknut

You really didn’t think the recently passed school bonds were actually going to go to the students or school repairs now did you?, or thought those were be the last time the schools cry for more money? They will never face the real problem as long as they can scare the voters out of more money.


kayaknut

I also see that of all the things that may have to be cut, salaries, pensions, benefits administration sizes are not mentioned.


rukidding

Educators should NEVER be allowed to manage any large sums of money. Their sole purpose is to educate and I would say that none of them have ever had any hands on experience with managing money that has a direct impact to their well being.

Most have only the experience of cashing their monthly check and hoping that they can manage their money until the next payday.

All school districts should consider having people with real business financial experience managing the taxpayers money and at the same time the educators should attempt to do what they are paid for-educate the kids.


SloTownMan

Should read “LIBERALS SHOULD NEVER”


laftch

Those that can, do. Those that can’t, teach.


RonHolt

That expression is more appropriate to the University System — and not always there either. I don’t have a problem with teachers getting decent pay and benefits as long as they are doing their jobs properly. The cutbacks need to come on the administrative side and to do that, they need to start rethinking a lot of the trivial BS that schools are required to do in addition to actually teaching.


aft50s

A good example of this dilemma is Mark Millis who retired from Lucia Mar and is now receiving $77,000 / year in retirement pay from CalSTR.


Problem is that it’s not sustainable for much longer.


Kaiser Bill

$77K pension for a retired teacher isn’t even outrageous in public education. Look at the local administrators with six figure pensions!


http://transparentcalifornia.com/pensions/2014/calstrs/?e=SAN%20LUIS%20COASTAL%20UNIFIED%20SCHOOL%20DISTRICT


cooperdog

Enough already!


rukidding

What a surprise! These self proclaimed geniuses just figured this out like it just happened overnight? The answer is just keep giving those pay raises, adding benefits and loaning money out to buy houses at a lower rate than the rest of us get.

We probably will not have to hold our breath too long before we hear the cry for higher taxes and/or more bonds.

We probably need to get prepared for all California government agencies to take the same actions with the same results. Just tax us more and more.


Black_Copter_Pilot

I noticed that no one is proposing or taking a pay cut or suggesting they be swept in to the new cost effective tiered pension plans.


rukidding

You forgat the standard answer to that question. We HAVE to pay them this and give them that or else they might leave.

So those that think this way will give them the raises and increased benefits. So then what happens? They too have to get their increases so that they all can be competitive and most of all happy. After all we are the happiest, aren’t we?


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