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News Update

Districts propose 2-year suspension in increases for employee pensions

Bracing for potential budget cuts to K-12 education, a half-dozen of the state’s largest school districts are asking the Legislature and Gov. Newsom to suspend scheduled increases in contributions to the two pension funds representing school employees. The projected savings for school districts statewide would be an estimated $1.3 billion in 2020-21 and less than half of that in 2021-22.

Since the Legislature passed a law in 2013 to save the pension funds from insolvency, school districts’ pension contributions have more than doubled for teachers through CalSTRS and for other employees lacking a teaching credential through CalPERS. Districts’ funding for CalSTRS alone would rise by $1 billion in 2020-21, the last of seven straight years of increases under the law, before plateauing.

CalSTRS “employer rate increases have posed serious challenges for us even during times of reliable income. Now, facing the prospects of less revenue growth, paying those increases places an additional burden on our resources, and directly impacts what we can do for our students,” San Francisco Unified Superintendent Vincent Matthews wrote in an April 13 letter to Assembly Budget Chairman Phil Ting. Superintendents from the Los Angeles, Sacramento City, San Diego, Corona-Norco and Long Beach school districts wrote a similar April 15 letter to Newsom.

“We’re trying to point out that if districts’ budgets next year are flat or reduced, they would have an inability to shoulder more than $1 billion in new costs,” said Kevin Gordon, president of Capitol Advisors Group, an education consulting company in Sacramento, who first floated the idea earlier this month.

A two-year suspension of pension fund increases could push back the statutory timetable for restoring solvency to the pension funds from 2046 to 2048.