Soaring Pension Costs Devour School Budgets in California

The revised budget unveiled in May by California Gov. Jerry Brown seeks to increase the amount of money that public school districts and their teachers would pay into the teacher pension fund going forward. The legislature must approve a budget by June 15 or legislators forfeit their pay until a budget is passed.

The amount that school districts would pay into the California State Teachers Retirement System (CalSTRS) would jump from 8.25 percent of teachers’ salaries to 19.1 percent, based on the governor’s budget plan. Rates would ramp up to the full 19.1 percent over a seven-year period.

Teachers’ contributions to CalSTRS would also increase, from 8 percent of their salaries to 10.25 percent, and take three years to reach the 10.25 percent rate. The State of California—meaning state taxpayers—would also pay more into CalSTRS.

For Alameda Unified School District (AUSD), for example, the district’s share of pension costs would rise from $3.9 million to $9.6 million by 2020, according to the district’s chief business officer, Robert Clark. This would be nearly a 150 percent increase in just six years.

Alameda’s teachers would also be expected to increase their pension contributions, about $500 to $600 a month, depending on each teacher’s salary. But according to one news report, the teacher union president in Alameda, Audrey Hyman, insists “school districts should increase teachers’ compensation to help them meet their rising pension costs if the proposal is approved by lawmakers.”

In other words, union officials want the school district to pay for the teachers’ share of any future pension-cost increases, not the teachers themselves who will benefit from the pensions. This perk, known as “pension pick-up,” is unfair and encourages teachers to “shoot for the moon” when lobbying for higher pension benefits because they know they won’t be stuck paying any of the additional cost. Chicago’s budget has suffered greatly from this “go for broke” teacher response.

All of the additional money needed by AUSD and its teachers for CalSTRS will be grabbed from other parts of the budget. Alameda parents need to realize that if their local school building is crumbling and classrooms are starved for resources, generous teacher pensions are a major cause, swallowing up money that would otherwise fund classroom instruction. This diversion of money to pensions will happen in school districts across the state.

Long term, state taxpayers should not be forced to contribute anything into CalSTRS. Public school teachers are hired by school districts. They are employees of those school districts. They are not state employees. And teachers negotiate pay and benefits with school districts. State taxpayers are not seated at the bargaining table.

It is immoral to make state taxpayers backfill CalSTRS’ deficits. Long term, state taxpayers should be relieved of any obligation to fund public teacher pensions. School districts and teachers should fund their own pensions. Gov. Brown and the nonpartisan Legislative Analyst’s Office have each made statements generally supportive of this change.

A serious reassessment of California’s public employee pension systems is long overdue. If changes are not made, schools and other public services will continue to suffer as more money is poured into pensions, leaving less money for traditional public services such as police, firefighters, libraries, roads, and schools.

Lawrence J. McQuillan is a Senior Fellow and Director of the Center on Entrepreneurial Innovation at the Independent Institute. He is the author of the Independent book California Dreaming.
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