California school districts are facing a tough choice —what programs must be cut to meet pension obligations.
Cities and counties have struggled with rising employee retirement costs for years, and public schools are beginning to feel the same crushing burden.
Teachers’ pensions are relatively modest compared to cops and firefighters, but after years of underfunding, the state teachers’ retirement system has $224 billion in assets and an unfunded liability of $107 billion.
To put that 11-digit number in perspective, it’s about $2,500 for each of California’s approximately 40 million residents.
And it has grown by about $30 billion since 2014, despite a robust stock market.
A day of reckoning is now approaching. Under a funding plan enacted in 2014, with a goal of fully funding teacher pensions by the mid-2040s, retirement contributions are going up for teachers, the state and, especially, for school districts. Payments from school districts will go up from 8 percent of payroll in 2013 to 19 percent by 2020.
The 19 percent contribution is in line with what a lot of other public employers in California pay into pension funds. But it’s likely to eat up “well over half of all the new money they’re projected to receive” from a state increase in spending on K-12 education, “leaving little extra for the classroom,” according to a report by CALmatters, a public interest journalism organization that covers California government.
“This is true even though the California State Teachers’ Retirement System just beat its investment goals for the second straight year,” CALmatters reported last month.
Some districts already are talking about cutbacks, including staff layoffs and larger classes to help cover their pension obligations — mirroring reductions in city and county services as their pension costs have risen.
Some districts, including Santa Rosa City Schools, where a post-fire decline in enrollment is an added budget complication, are asking voters to raise taxes to avoid or, more likely, limit program cuts.
Neither approach will be popular. Unfortunately, both could be undermined by ongoing efforts to politicize pension funds.
In recent years, teachers and activists have pressed for CalSTRS to sell off certain holdings and to adopt policies prohibiting certain investments, including, among other things, companies involved in a disputed oil pipeline in the Midwest and design or construction of President Donald Trump’s proposed border wall.
The latest controversy involves CalSTRS’ investments in two prison companies that are housing detainees from the Trump administration’s immigration crackdown. The pension fund’s chief investment officer is conducting a study that could result in CalSTRS selling off its $12 million stake in the companies.
We’re as disturbed as anyone about parents being separated from their children. We don’t think a wall is the way to secure the border — or that it would halt illegal immigration.
We also don’t believe that pension funds can afford to make political statements, especially when they are tens of billions of dollars short of the money they need to fulfill their promises to beneficiaries.
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