California Governor Jerry Brown has been wrestling with the ten-ton octopus that is the state’s pension debt—and now has a new plan to pay off $74 billion in unfunded liability for the teachers’ pension funds. As it currently stands, the fund (called CalSTRS) is scheduled to run out in 33 years.The Governor’s plan to pump money into the fund will mostly put the squeeze on district schools, which will see their contributions more than double. The LA Times has the story:
Brown’s revised budget proposes to close the financing gap by bringing more money into CalSTRS from three sources: teachers, taxpayers and school districts. And the latter would be hit so hard by the plan, you can expect school boards and superintendents across the state to howl in protest.
Beneficiaries’ contributions will increase from 8 percent to 10.25 percent of pay over three years, and the state will also pony up more (from 5.5 percent to 8.8 percent of payroll over the same period). But:
The higher burdens on teachers and the state general fund pale in comparison, however, to what Brown’s plan asks of school districts, whose contributions would increase over the next seven years from 8.25% of payroll to 19.1%. In other words, school boards would have to put more than twice as much into pension benefits seven years from now as they do today.And because teacher salaries constitute about 40%of the typical district’s budget, according to the American Assn. of School Boards, that means pension contributions will go from about 3.3% of the total school budget to 9.6%.
Where will they get the money? The state is slated to pour more funds into the schools, but the districts may also have to cut back on teachers and put more students in already crowded classrooms.There is no good side to this story, even though Governor Brown is making the right call; it certainly won’t improve the quality of education that the schools offer. This is what comes of the blue state model.