By Richard Bammer
New state revenues will not match expenses during the 2017-18 academic year, Vacaville Unified’s chief business officer told district leaders during a governing board meeting late last week.
During a budget update in the Educational Services Center, Deo Persaud said the state’s 1.48 percent cost-of-living adjustment, or COLA, while welcome news, will not offset expenses that are “likely to exceed” 4 percent in the coming year.
Additionally, like all of California’s 1,000 school districts, Vacaville Unified continues to face, for the next few years, increasing pension costs for teachers and school-support, or classified, employees, he noted.
Sure to add to budget pressures that eventually will prompt calls for fiscal restraint, Persaud said district contributions to CalSTRS, the mammoth state teachers retirement system, will account for 12.6 percent of the budget in the current fiscal year, 14.4 percent in 2017-18, and 16.28 percent in 2018-19.
Source: CBO: New state revenues to fall short of expenses in 17-18
In 2014, the Legislature and Governor approved a plan that aims to fully fund teacher pensions over the next 30 years. This online series will examine how the CalSTRS funding plan is being implemented.
Funding Plan Is a Major State Accomplishment. Prior to state action, CalSTRS projected that it would run out of assets in the mid-2040s, an alarming prospect for a pension system. The funding plan aims to fully fund CalSTRS by that time.
As we describe in our first post, the CalSTRS funding plan is a major state accomplishment.As we describe in our second post, however, the implementation of the law differs from our earlier understanding. Specifically, the plan now relies on a calculation that is complex even by pension standards.
While CalSTRS appears to be interpreting and implementing the law in good faith, we are concerned that some aspects of the funding plan may no longer reflect the intent of the Legislature when it passed the law. As we described in our concluding post, tweaks to the law may be necessary to ensure that the Legislature realizes its intent for CalSTRS.
By Richard Bammer
Travis Unified leaders heard a sobering account Tuesday of how Gov. Jerry Brown’s latest state budget may affect the Fairfield school district, with a finance official pointing out several caution-worthy variables, including inflation, capital gains, and per-pupil funding.
But perhaps most significantly for the district’s bottom line in the coming years are employee pension costs, said Ken Forrest, chief business officer for the 5,100-student district.
Like other California districts, Travis faces increased employee and employer contributions to the state teachers (CalSTRS) and state employee (CalPERS) retirement systems.
via Employee pension obligations worry Travis school district officials.
Over half of new teachers won’t meet the minimum vesting or service requirements to receive a pension. One common response is that these teachers are allowed to receive a refund on their contributions plus interest, and that the refund is comparable to private sector workers who receive a 401k. It’s a good point, but it’s not exactly the case for all teachers.
While it’s true a teacher can get a refund on her pension contributions plus interest in some states, like California, in other states, like Illinois, teachers do not receive interest. In fact, in Illinois, teachers receive less than their original employee contributions. An Illinois teacher is required to contribute 9.4 percent of her paycheck to the state teachers’ retirement system. Upon leaving the classroom, however, she is only entitled to a refund equal to 8.4 percent of her earnings. And, in the majority of states, teachers do not receive any portion of their employer’s contributions.
via Eduwonk » Blog Archive » Are Pension Refunds the Same as a 401k?.
Gov. Jerry Brown blunted the expansionist tendencies of his fellow Democrats in writing a new state budget, but that doesn’t mean it’s the “balanced” spending plan that he and other Capitol politicians are claiming.
They define “balanced” as the state’s having enough revenue to pay for the 2013-14 budget’s appropriations. However, their budget ignores some very real obligations that, if recognized, would put the state many billions of dollars in the red.
via Dan Walters: Is California’s new budget balanced? Not really.
David Crane, a businessman who advised former Gov. Arnold Schwarzenegger on financial matters – particularly long-term public pension deficits – recently wrote an I-told-you-so piece for the Bloomberg news service about the State Teachers Retirement System.
He and others had postulated last year that if voters approved the sales and income tax hike being sought by Gov. Jerry Brown, they would see the money disappear into CalSTRS, rather than into classroom instruction, as Brown, et al., insisted.
via Dan Walters: California Legislature ignoring teacher pension gap.
The unfunded liability at the California State Teachers’ Retirement System is $73 billion currently and growing at the astonishing rate of $17 million per day. If corrective action is not taken – that is, if the state, school districts or teachers don’t contribute more into the fund – CalSTRS could deplete all its assets by 2044.
The spreading red ink at the teachers’ retirement system “may be the state’s most difficult fiscal challenge,” the Legislative Analyst’s Office warned in a recent report.
via Editorial: State must fix liabilities that loom at CalSTRS.
When Gov. Jerry Brown talks about paying down the state’s “wall of debt,” he doesn’t mention the state teachers’ retirement system. And yet the towering $73 billion unfunded shortfall in the state pension fund for teachers and administrators, the California State Teachers’ Retirement System, makes Brown’s wall, at about $30 billion, look like a picket fence.
On Wednesday, at a joint legislative information hearing, speakers from CalSTRS, groups representing educators, and the Legislative Analyst’s Office urged the Legislature to act now to address the outstanding liability. If nothing is done, CalSTRS won’t have enough money to cover the retirement benefits it promised to the teachers and administrators who will one day be drawing it down. Fully restoring the financial health of the pension fund will be tremendously expensive – requiring $4.5 billion to $5 billion annually in additional contributions, primarily by school districts and the state.
via Solving teacher retirement system’s shortfall would cost billions – by John Fensterwald.
By John Fensterwald
Later this week the board of the California State Teachers Retirement System, or CalSTRS, will forward to the Legislature a report laying out options for raising higher contributions into the pension system to ensure its long-term viability.
The Legislature has avoided action for a decade, and Gov. Jerry Brown’s budget forecast for education, with healthy projections for revenue, doesn’t take into account the daunting cost of teachers’ pensions on the expense side of the ledger.
via CalSTRS board to forward options for saving teacher pensions – by John Fensterwald.
The California Public Employees’ Retirement System has reported – with no small elation – that it has recouped virtually all of the $95 billion in investment losses it sustained during the global financial crisis.
A steadfast investment strategy and a generally rising stock market are responsible for the recovery, CalPERS says.
via Dan Walters: California pension funds still face huge liabilities.
By Louis Freedberg
Less than a day after the California teachers pension fund threatened to withdraw its investment, a major private equity firm has announced that it will sell Freedom Group, a company it formed that includes the manufacturer of the rifle used by Adam Lanza to massacre 26 people at Sandy Hook Elementary School in Newtown, CT.
Cerberus Capital Management is owned by billionaire Stephen Feinberg, who is a gun enthusiast and whose father happens to live in Newtown. Bushmaster, which produced the AR-15 semi-automatic weapon reportedly used by Lanza, was one of six gun companies that Cerberus had bought and consolidated into Freedom Group.
via California teachers retirement fund threat triggers sale of gun company – by Louis Freedberg.