Rising pension costs threaten California school funding

 

In a shock critics had warned against, Golden State schools discovered that their nation’s largest pension system, CalPERS, was on track to force substantial budgetary cutbacks on core education spending. 

“Public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars from classrooms into retirement accounts, education officials said,” the San Francisco Chronicle reported. “The depth of the funding gap became clear to district leaders when they returned from the holiday break: What they contribute to the California Public Employees’ Retirement System, known as CalPERS, will likely double within six years, according to state estimates.”

Bad grades

The controversy hit as a fresh study brought unwelcome news about California’s nationwide education standing. The report, by Education Week, “looked at multiple ways that states are educating and preparing children for school,” the San Jose Mercury News reported. “For pupil achievement, for instance, the magazine considered 18 measures such as graduation rates, reading and math tests, Advanced Placement exam results, equity and achievement gaps.”

“In academic performance — as measured by the 2015 National Assessment of Educational Progress test and by poverty figures — California earned a D-plus. But in improvement over time, the state posted a C. In equity, California scored a relatively high B-minus — but that was still 41st in the nation, and below the national average of a B.”

A spokesman for California Superintendent of Public Instruction Tom Torlakson called the data behind the survey “outdated,” the Mercury News added, although it was no older in California’s case than any other state. “California is moving in a positive direction,” the spokesman insisted. “We’ve dramatically increased our investment in education.”

Underperformance

But that investment, according to new estimates, has been placed at risk of being consumed by pension costs. “There is a predicted shortfall among all state retirement accounts of at least $230 billion based on what’s owed to current and future retirees. The pension funds, including CalPERS, haven’t made as much money from the stock market and other investments as they had hoped,” the Chronicle noted. “CalPERS officials had hoped to gain a 7.5 percent annual return on investments, but they didn’t come close in either of the last two years.”

Despite optimistic predictions, underperformance has been a constant for the fund: “Over the last 20 years investment returns averaged only 6.9 percent, with the current annual return bringing in only 2.3 percent,” Pepperdine professor Joel Fox observed in the Orange County Register. “Facing market realities, the board lowered the estimate to 7 percent, a mark that still may be unattainable.”

“For taxpayers, the number change likely means more dollars from state and local government budgets will be directed to cover pension liabilities and less will be available to meet services supplied by government. The city of Los Angeles already dedicates 20 percent of its budget for pension obligations, Anaheim 13 percent, Long Beach 11 percent and San Jose as high as 27 percent.”

Double burden

At the same time, school districts have howled over the additional adverse impact of the state’s other pension liabilities. “In 2014, the Legislature adopted Assembly Bill 1469, which seeks to pay down CalSTRS underfunding over about 30 years by relatively small increases in contributions from teachers and the state, and by increasing school districts’ contributions over seven years by 10.85 percent,” former Piedmont USD Board of Education member Richard Raushenbush wrote in the East Bay Times. “In 2020, school districts’ CalSTRS contributions will be 19.1 percent of teacher payroll!”

“This is not sustainable. School districts are funded by the public to provide free public education; they do not make profits that can be devoted to paying off the Legislature’s CalSTRS debt. The Legislature did not provide any new funds to pay the significant CalSTRS’ increases.”

19 comments

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  1. Ronald Stein
    Ronald Stein 3 February, 2017, 13:54

    It’s the inmates running the pension Asylum that are loading up system with lucrative “defined benefits” packages for themselves.

    The international business world is intelligent enough to know that DEFINED BENEFITS are financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.

    Stealing from the young who silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

    The inmates know that debt for our future generations buys votes. Over the decades, the proven “concept’ practiced by voters is to defer as much financial responsibilities as possible from our current financial responsibilities to future generations, that have no votes on the subject.

    Currently, it’s the future generations that will have the responsibilities to pay for the unsustainable pension programs, other boondoggle projects, and added inefficiencies built into our government. Simply stated, if we cannot afford it today, pass it off to the future generations to minimize any impact on our current lifestyles.

    Virtually all elected officials are heavily financed by unions which are focused on entitlements for their current members. Thus, no changes can be expected in the foreseeable future for elected officials to ever abandon their source of votes.

    It’s unfortunate that those future generations, unable to vote today, will bear the costs of many enacted entitlements and boondoggle projects.

    Reply this comment
  2. JPR11
    JPR11 3 February, 2017, 13:57

    Prop 30 was proposed and passed to provide additional education funding. What is obvious and not mentioned was in reality it will go to offset the increasing pension costs. The only way out is for the state to declare bankruptcy.

    Reply this comment
  3. Dude
    Dude 3 February, 2017, 14:07

    You can lay this larceny at the feet of the CTA and Governor Moonbeam. They knew all along that this was the case. They also knew…”districts to divert billions of dollars from classrooms into retirement accounts”. Public employee unions = corruption.

    Reply this comment
    • Queeg
      Queeg 3 February, 2017, 15:08

      Comrade Dud

      Get it all out… now get your budget in order “for the kids”.

      Reply this comment
  4. DaughterofPB
    DaughterofPB 3 February, 2017, 14:08

    i got some of my friends to understand this.We are for killing of school retirees ar 65. My friend Alex said his Dad is on disability as a cop and plays golf six days a week. He is 53. Alex does not want to wait till his Dad is 65. My friend Maria said her Dad is a retired prison guard and makes $97000 a year. What is it with some parents, they don t want to work, but they get paid? Why should I work if they do not have to?

    Reply this comment
    • ricky65
      ricky65 4 February, 2017, 06:56

      Good point DPB- Some of these cops & firemen are retiring so early they are targeted by young women looking to marry them because of their lucrative pensions.
      When the old cop finally dies after golfing for forty years in retirement, his young wife as designated beneficiary gets his pension and lives the good life for another forty years.
      It’s how a lifetime pension becomes a generational pension.

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 7 February, 2017, 02:59

        1) They will have to marry at least a year before retirement to qualify as a beneficiary.

        2) The lucrative pension will be actuarially reduced depending on the relative ages. My wife is only five years younger than I, and my pension was reduced by about ten percent to allow her full continuance.

        3) Probably not worth it to have to put up with an old cop.

        Reply this comment
  5. Queeg
    Queeg 3 February, 2017, 15:03

    Comrades

    Useless to fight the myopic, big word for Queegie, vision of The State .

    Assume the obligatory position….

    Reply this comment
  6. aTaxpayer
    aTaxpayer 3 February, 2017, 17:23

    Can California afford to be even considering being its own country, when it relies so heavily on federal funding, and–apparently–can’t pay its contractually-obliged pension and medical obligations?

    Reply this comment
  7. Ted. Mentor to the doomed....
    Ted. Mentor to the doomed.... 3 February, 2017, 18:15

    Lads— It’s all a program— the program ends and the meat is harvested…..relax—- breath deep—–

    Reply this comment
  8. Donkey
    Donkey 4 February, 2017, 19:33

    The RAGWUS is hanging itself, and I love watching it happen. 🙂

    Reply this comment
  9. Ulysses Uhaul
    Ulysses Uhaul 5 February, 2017, 00:04

    Your sick Donkey……welcome back…you were replaced by some really challengig trolls.

    Reply this comment
  10. Vince Fister
    Vince Fister 5 February, 2017, 19:19

    I have come back from the other side. Where is Rodham?

    Reply this comment
  11. poortaxpayer
    poortaxpayer 7 February, 2017, 08:24

    We need to start taxing disability payments IN FULL once they exceed the poverty level. Cop, firefighter, and prison guard disability benefits are the biggest racket going along with outrageous workers compensation awards and sick leave cash outs at retirement. Safety unions stranglehold on politicians who are terrified of upsetting their gravy train are ruining lives of millions who must work longer and struggle to pay disability benefits of the most healthy members of society.

    Reply this comment
  12. Gonzo
    Gonzo 8 February, 2017, 12:28

    Calpers could hit it really big if they would just put their whole portfolio into alternative energy stocks! “it’s the future”. Get on board. What could go wrong. I mean look at Solyndra. They’re rocking!

    Reply this comment
  13. Ted
    Ted 8 February, 2017, 21:13

    Waaaaaaaaa—- I did not choose well in my life choices…..waaaaa— my job has no pension and I didn’t save anything for retirement so now I have to work til I’m 75…..waaaaaaaaaaaaaaaaaaaaaaaaaa

    pension eeeeeeeeeennnnnnnnnvvvvvyyyyyyyyy

    Reply this comment
  14. Bill - San Jose
    Bill - San Jose 13 February, 2017, 19:00

    Good. The calpers building is the nicest one downtown. They can sell it or sublet it to someone to make up the difference.

    Remember that this guy at the governor house is the reason we’re in this mess by ushering in unions to government workers and thus the thugging of politicians ensued.

    Go to a local school board meeting and watch the SEIU thugs push the school board around for money and benefits.

    Reply this comment

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