As Aaron Fix negotiates a new contract for Novato teachers, he faces two obstacles: Less income from the state and rapidly escalating pension contributions.
“CalSTRS is eating up more,” said Fix, the president of the Novato Federation of Teachers, referring to the California State Teachers’ Retirement System.
A drastic shift in the burden of retirement costs is compelling school districts in Marin and across the state to divert money that could otherwise be spent on salaries and in the classroom toward pension costs.
The problem affects not just Marin County, but every public school district in California.
Districts must contribute more to CalSTRS, which manages retirement benefits for current and former teachers, and CalPERS, the California Public Employees’ Retirement System that oversees pensions for non-teaching school personnel.
MARIN EDUCATION > MORE COVERAGE
Next year’s increase in CalSTRS and CalPERS contributions from all parties is about $1 billion, according to California’s Legislative Analyst’s Office.
While employees, employers and in some cases, the state will contribute to help make up the difference, the lion’s share is falling on the school districts.
It has long been known that California’s pension systems are running out of money. The pension funds, including CalPERS and CalSTRS, aren’t making as much money from their investments as they had predicted.
The CalSTRS retiree benefit fund has a total $74 billion in unfunded liability. CalPERS’ performance has fallen short of the 7.5 percent annual return it expected on investments. It only earned about 0.6 percent in 2016.
CalSTRS contributions from school districts “were around 8.25 percent for many years,” said Sheila Vickers, vice president of School Services of California, a firm that provides financial advice to many of the state’s school districts.
Contributions rise
Under AB 1469, a state law, the contributions went to 8.8 percent in the 2014-15 school year, then to 10.73 percent in 2015-16, Vickers said. The contribution is 12.58 percent for the 2016-17 school year. The rate is scheduled to reach 19.1 percent in 2020-21.
These are the contributions the districts must make on behalf of teachers and other credentialed employees such as school psychologists, counselors and principals.
Retirement benefits for school employees who don’t have credentials, such as custodians, are managed by CalPERS the retirement system that handles benefits for a variety of government employees.
In the 2016-17 school year, districts’ contributions to CalPERS are the equivalent of 13.88 percent of payroll. The rate is projected to increase to 28.2 percent in 2023-24.
“For most local school districts, the increase in revenues provided by the state, or in basic aid districts by property taxes, may not be enough to cover these automatic cost increases,” Vickers said.
Funding formula
California’s school districts are funded in one of two ways: Either based on average daily attendance plus the number of certain students enrolled, or from property taxes paid by residents of the district.
“These are costs that must be borne by the school districts, whether they get enough revenue to pay for them or not,” Vickers said.
Ross Valley School District Board President Anne Capron said, “It more than eats up any increase in funding. Legislators are messaging that there are increases in public education funding, but actually there are not.”
“So any money that is used toward contributions can’t go to directly support the educational needs of kids,” Capron said.
“Any additional costs that aren’t covered by increases to funding will have a negative impact on district operations and in the classroom,” said Yancy Hawkins, Novato’s assistant superintendent of business. He noted that teachers in CalSTRS are not eligible to receive Social Security benefits.
Frustration
Marin County Superintendent of Schools Mary Jane Burke said she wants the state to pay the increased contribution, not the districts. She expressed considerable frustration with the present arrangement.
“We have no control over it (contributions),” Burke said. “It’s totally disingenuous to give us unfunded liability and call it local control. This is another example of what happens when schools are not adequately funded.
“If this doesn’t get resolved we are going to see cuts in our schools related to both staffing, class sizes, issues like school transportation,” Burke said.
“We’ll be looking to our legislators to assist in ensuring that the state takes on its appropriate funding responsibilities,” Burke said. “I would prefer that the state pay the pension contributions directly to STRS and PERS.”
“This will require our entire education community to cry foul and to hold the state accountable,” Burke said.
Heavy burden
Burke lobbied Marin legislators in January, she said, and she has scheduled a public meeting on the subject in San Rafael on March 29.
Union President Fix said he was on board with Burke’s proposal.
“I agree. I think that is the solution,” Fix said. “The state needs to contribute more. It’s not fair that the burden is so heavily placed on districts.”
Joe Montero, CEO of California’s Fiscal Crisis and Management Assistance Team, will speak at the March 29 meeting. Montero’s team provides fiscal advice to California’s local educational agencies. The meeting will be held at the Marin County Office of Education at 1111 Gallinas Ave. at 4 p.m.
