Brown’s CalSTRS fix hammers districts, protects teachers
May 14, 2014 - By Chris Reed
Contrary to the impression given by some of the current coverage of Sacramento’s attempts to shore up the California State Teachers’ Retirement System, the underfunding problem hasn’t been completely ignored for all these years. Here’s what I wrote about the last serious attempt to change a broken formula in 2007, undertaken by the CalSTRS board:
“Under the present pension funding system, school districts pay 8.25 percent of payroll toward long-term obligations, teachers give 8 percent of their paychecks and the state contributes an amount equal to about 2 percent of the payroll of CalSTRS-covered employees.The Sacbee story noted that the CalSTRS board wants to change the formula by increasing teachers’ contribution to 8.5 percent and gradually upping the state’s contribution to a max of 3.25 percent and gradually increasing school districts’ contributions to a max of 13 percent.”
To put that in context, CalSTRS proposed teachers increase their contributions by 6.25 percent over what they pay now under the current formula; that school districts increase their contributions by 58 percent; and that the state increase its contribution by 62.5 percent. So taxpayers would be expected to shoulder 10 times the burden of additional costs as teachers.
Teachers’ share of contributions would go from 37% to 27%
Here’s what Gov. Jerry Brown proposed on Tuesday in his revised budget:
“Under the funding plan, teacher contributions will increase from 8 percent to a total of 10.25 percent of pay, phased in over the next three years. School contributions will increase from 8.25 percent to a total of 19.1 percent of payroll, phased in over the next seven years. These school contributions will be paid from existing revenue sources. The state’s total contribution to the Defined Benefit plan will increase from approximately 3 percent in 2013‑14 to 6.3 percent of payroll in 2016‑17 and ongoing. In addition, the state will continue to pay 2.5 percent of payroll annually for a supplemental inflation protection program — for a total of 8.8 percent.”
So the 2014 version of the 2007 reform would see teachers increase their contributions by 28 percent over what they pay now under the current formula — much more than 6.25 percent increase contemplated in 2007. The state’s contribution would go up by about the same as anticipated in 2007 — 62 percent.
But school districts would be annihilated. Their contribution increase proposed in 2007 was 58 percent. Under Gov. Brown’s plan, the increase would be 132 percent. The percentage of salary that the districts have to collect to cover its required pension contribution is huge already. Hard numbers aren’t available yet, but it looks like a 3 percent or 4 percent hit on districts’ operating budgets.
That’s going to be devastating for all school districts — especially the many districts which already spend more than 85 percent of their operating budgets on compensation.
Presently, teachers pay 37 percent and taxpayers pay 63 percent of the amount collected by CalSTRS annually. Under Brown’s proposal, teachers would pay 27 percent and taxpayers 73 percent.
School districts would go from footing 38 percent of the pension funding responsibility to just over 50 percent (19.1 percent of salaries vs. teacher contributions and state contributions of 19.05 percent).
CTA might oppose any fix that reduces take-home pay
So much for Jerry Brown’s 2011 pension manifesto. Instead of public employees and their agencies gradually moving toward a day in which pension costs were equally divided — Brown’s bold alleged goal no. 1 — teachers stand to get an even better deal then they had in 2011.
And what’s absolutely crazy about this is that I know some CTA members who don’t think their leadership will settle for anything that leads to a cut in take-home pay. For teachers who have to pay 2.25 percent more of their salary to CalSTRS in a year in which they don’t get a “step” or “column” increase, their paycut will shrink.
How California: a pension deal that protects teachers to a degree not enjoyed by any other government union may not insulate teachers enough to win their support!