Alameda Unified facing pension cost hike
Alameda Unified facing pension cost hike
Chart courtesy of the Alameda Unified School District.
Updated at 7:52 a.m. Sunday, June 1
Alameda Unified’s pension costs could nearly triple and those of its teachers could rise by 25 percent under Governor Jerry Brown’s proposal to reform the California State Teachers Retirement System, or CalSTRS.
Brown’s “May Revise” – a revised budget proposal floated earlier this month – seeks to increase the amount school districts will pay toward teachers’ pensions from 8.25 percent of their salaries to 19.1 percent over seven years. Teachers would see their contributions rise from 8 percent of their salaries – the amount they’ve paid since 1972 – to 10.25 percent, over three years. The state would also contribute more to the pension system.
The district budgeted $3.7 million to cover its share of teachers’ pensions this year; under the governor’s proposal, Alameda Unified’s costs would rise to $9.6 million by 2020, the district’s chief business officer, Robert Clark, told the Board of Education on Tuesday. Local teachers’ pension costs could rise by $500 to $600 a month, though the amount would depend on their salaries, Alameda Education Association president Audrey Hyman said.
A district spokeswoman, who responded to questions from The Alamedan after this story was published, said the district agrees that the pension liabilities need to be addressed but said the "last minute" change to the district's budget projections is "significant." She said the district hasn't had the time to make budget decisions yet based on the pension proposal and that any adjustments that will be needed will come in lat summer and early fall.
Brown announced in January that he planned to address the unfunded pension liability, and that school districts “should anticipate absorbing much of any new funding requirement.” At that time, district officials said it was too soon to know what the final budget might look like.
Hyman said that the pension fund should be maintained – and that school districts should increase teachers’ compensation to help them meet their rising pension costs if the proposal is approved by lawmakers.
“At the end of the day, teachers deserve to have a retirement and a pension available to them,” she said.
The governor’s plan indicates that the increases are needed to close a $74.4 billion shortfall that Brown attributes to underfunding, increased benefits and poor stock market returns. Without the money, the state’s teacher pension system could go bankrupt in 30 years, projections from the governor’s office show.
Brown aims to erase the pension shortfall by increasing contributions to the system by $450 million between the state, its school districts and its teachers this year, an amount that under his plan would grow to an additional $5 billion a year. All told, an amount equal to 19.33 percent of the state’s teacher payroll goes into funding pensions; under Brown’s plan, that would rise to 35.7 percent of payroll.
In contrast, the city pays 36.5 cents per dollar of salary on public safety workers’ pensions, while the workers themselves contribute 15 cents for every dollar of salary; non-safety workers contribute close to 9 cents per dollar, while the city pays 15 cents per dollar of salary on pensions. The city spent $13.6 million on pension costs in 2013.
CalSTRS has about two-thirds of the money it would need to pay everything it owes now to the 862,000 active and retired teachers it serves, though the payments will come due over the next several decades. The fund’s managers have for several years pressed state lawmakers – who set contribution rates – to invest more in the 101-year-old retirement system.
The state’s contribution to the system is less than half what it was in 1998, a 2011 fact sheet says. Meanwhile, benefit enhancements were enacted in 1998 and 2000 to address a teacher shortage, though some of the enhancements have since expired, the fact sheet says.
Lawmakers raised the age at which teachers hired in 2013 and beyond could retire with full pensions – 2 percent of pay for each year served – from 60 to 62 and trimmed benefits as part of a 2012 pension reform package.
The median retirement age for members is 62, with retirees earning an average of $3,936 a month, according to CalSTRS’ website (a recent report said the median benefit equals 53 percent of retirees’ final compensation). Teachers enrolled in the system do not receive Social Security.
Separately, the governor’s plan could mean increased costs to cover pensions for the district’s non-teaching staff. Under Brown’s revised budget plan, pensions included in the California Public Employee Retirement System, or CalPERS, could rise from an estimated $1.7 million for 2014-15 to $3.3 million in 2020.
If the increases are approved, they could cost Alameda Unified an additional $26.3 million over seven years, Clark’s presentation to the school board showed. The district was prepared for CalPERS increases but not Brown’s proposal to increase teacher pension costs, Clark’s presentation says, though Brown said in January he planned to draft a plan to do just that.
On the positive side, Brown’s budget plan could mean Alameda Unified will get an average of $541 more per student than the district gets now, though the amounts will vary based on the percentage of low-income and English learner students each school serves. The state may also pay off $5.5 billion in IOUs for prior year funding owed to districts across California.
The deadline for adopting a state budget is June 15.