Surprise pension costs for school districts

Governor's proposal will hit district budgets hard in July

School districts got a surprise last month when Gov. Jerry Brown announced a new plan to pay for the state's pension shortfall. If the budget revision goes through, school districts will pay millions more for teacher pensions, and could start paying more as soon as next month.

Right now school districts pay 8.25 percent of teacher payroll towards their retirement fund. Under the governor's revision, districts will have to pay 19.1 percent -- phased in over the next seven years.

The increase is to help offset the $74 billion funding shortfall of the California State Teachers' Retirement System, and the governor's plan is to eliminate that unfunded liability by the 2045-46 fiscal year. For local school districts, this means a 1.25 percent increase this year and a 1.6 percent increase every year after that.

At the Mountain View-Los Altos school board meeting last week, Associate Superintendent Joe White crunched the numbers: the school would have to reserve $340,000 for the increase this year, $786,000 the next year, and almost $1.2 million the following year.

"The real crux to it is that this is only the beginning of it, because (Brown) has a seven-year plan," White said at the meeting.

When contributions finally reach 19.1 percent, MVLA will be putting well over $3 million into pensions on top of what they're already paying -- and it may continue to increase after that.

White said for now, students and parents won't have to worry about any new budget constraints or cuts to programs in the 2014-15 school year. However, as costs continue to increase quickly over the years, the district may need to cut expenses to shoulder the costs.

The Mountain View Whisman School District is in a similar situation. The district will use cash reserves to deal with the initial 1.25 percent increase and there won't be any spending cuts for the coming school year, according to Terese McNamee, chief business officer for the district.

White said the district has been expecting increased pension costs for a long time, but not in a revision just a month and a half before the start of the budget year. He said the 2014-15 increase is still "up in the air," and there's action in the state Legislature for a lower increase this year or a a delay until next year.

Despite the weird timing, White said it's good that the governor is finally dealing with the shortfall.

"Should it be funded? Absolutely, the sooner the better," White said. "It would've been nice to have some action back in January, but it's great that it's finally being done."

Along with school districts, teachers and the state will also pay more into pension contributions -- albeit smaller increases. Teachers will go from paying 8 percent of their salary to 10.25 and the state will go from 3 to 6.3 percent -- both over the next three years.

White said the state wasn't able to increase contributions in the last three or four years because the economy was too bad, and school districts were already struggling without the increased costs. The budget revision is the first big step in the post-recession economy to turn around a retirement fund that's projected to run out of money in just a few decades.


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Posted by Ok, that may work for teachers
a resident of Monta Loma
on Jun 10, 2014 at 2:26 pm

Ok, that may work for teachers, But how about the 80+ billion for regular non teacher govt. employees?

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Posted by James Thurber
a resident of Old Mountain View
on Jun 10, 2014 at 2:34 pm

As a teacher I appreciate being one of the few remaining "pensioners" in our society. But the system is underfunded and (essentially) bankrupt. This includes Calpers, Calstrs, and most city pension funds.

I believe that eventually (within the next five years) we should close out / shut down all government pensions. This would include municipal, county, state and federal pensions, all of them. Many of our large cities are facing bankruptcy, primarily because of the impact of their underfunded pension funds and the excessive costs of retired employees.

The pension funds (what remains of them) could be handed over to the Social Security Trust Fund thus permitting state / municipal / federal pensioners to collect social security.

Many (if not most) government pensioners were exempt from paying into social security but this would then entitle them to these benefits and, in the long run, work out as a better solution for everyone.

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Posted by @James
a resident of Monta Loma
on Jun 10, 2014 at 3:59 pm

Good point!! Get rid of the union run calpers, calsters and merge them in with SS, that could actually save SS.

Best to get rid of the Unions while we are at, they are the ones that brought us into this sorry state of affairs. So they can gamble your money away on the stock market. Really bright.

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Posted by Doug Pearson
a resident of Blossom Valley
on Jun 10, 2014 at 4:06 pm

I have to disagree with James Thurber's thought that his abrupt shift of state and local pensions to Social Security would "work out as a better solution for everyone." The pensioners would get a much smaller pension.

I'm sorry to say that is what a lot of people want.

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Posted by Enough
a resident of Old Mountain View
on Jun 10, 2014 at 8:01 pm

How about we stop all pensions for any government employees...period.
Grandfather the ones who are getting it now. Then end this ponzi scheme.
A few are being enriched by the overtaxed population.

 +   Like this comment
Posted by Justin Case
a resident of Jackson Park
on Jun 11, 2014 at 3:16 pm

My Union Boss down at the Town Hall emailed me yesterday and.
Told me that this article was hitting the Papers today, and He told Me.
to make it Look like I was Working till this Blows Over in a week. I
know the routine! In a week, I'll be back to my usual activity of.
Collecting A Paycheck for Doing Nothing! Hey, Private Sector.
Workers; You really gotta Pony Up more Taxes! I need at least a 10 %.
raise! My Cabin Cruiser at the Dock behind my Vacation House in.
Florida needs a New Engine. My wife has been after me for a new car.
She wants a BMW X6 G-Power Typhoon S! I told her I can't afford that.
car. So then she says she will accept a Mercedes-Benz CL-Class and.
Nothing else! I also got Private School Tuition of $ 40,000.00 due.
in September. I got Credit Card Expenses coming out my AXX! That
new 3000 sq ft extension on my house raised my property taxes $ 15,000.
The maid and the housekeeper want raises. The gardener also wants a.
raise. You see Bunky; It ain't easy in the Public Sector! So come
on Private Sector Worker; Pony Up and Pay More Taxes so I can afford to.
live here! You See; Life Is Not Fair, and the DemoRats will take.
care of Everything! HAPPY DAYS ARE HERE AGAIN!

 +   Like this comment
a resident of Bailey Park
on Jun 12, 2014 at 12:20 pm

Its amazing how school officials feign surprise at the obvious. School bureaucrats created this mess and the governor is not going to let them off the hook. He has his own problems with PERS , State workers come before local teachers

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