Despite a bright economic climate, voter-approved state tax hikes and $74.5 billion that California will devote to K-12 education and community colleges in 2017-’18 — a $3.1 billion year-over-year increase — schools are in financial distress. . . . With a currently healthy state budget, the biggest threat to balanced school budgets is the growing bite taken by public retirement systems — CalSTRS for teachers and CalPERS for support staff. Next school year, those taxes will be about 15 percent of employer payroll. In four years, the CalPERS payroll tax will exceed one-quarter of salaries and is scheduled to continue growing in an effort to enable it to better cover its projected retirement payouts. CalSTRS also will also grow.
In a big victory for labor, the Los Angeles City Council on Wednesday approved a contract giving six raises in five years to members of the Department of Water and Power’s biggest union. The vote came despite objections from some council members over what they considered a rushed process that didn’t give them time to scrutinize the deal. It also is expected to open the door for other labor groups at City Hall to demand generous salary packages at a time when the city is struggling with tight budgets and financial woes
Union dues take a large bite out of the paychecks of California teachers. We estimate that newly hired, full-time teachers will pay $37,000 in dues over a 30-year career. Further, if new teachers could fully opt out of the union and instead save their dues in an Individual Retirement Account, they would each have $228,000 extra in after-tax retirement savings.
In Santa Barbara County, the 2017-2018 budget calls for laying off nearly 70 employees while dipping into reserve funds. The biggest cuts are to the Department of Social Services, which works to aid low-income families and senior citizens. Meanwhile, $546 million of needed infrastructure improvements go unfunded as Santa Barbara County struggles to pay off $700 million in unfunded pension liabilities. County officials estimate that increasing pension costs may cause hundreds of future layoffs. Unfortunately, Santa Barbara County is far from alone. Tuolumne County is issuing layoffs in the face of rising labor and pension costs from previous agreements. In Kern County, a budget shortfall spurred by increased pension costs has led to public safety layoffs, teacher shortages, budget cuts, and the elimination of the Parks and Recreation department, even as Kern County’s unfunded pension liability surpasses $2 billion. In the Santa Ana Unified School District, nearly 300 teachers have been laid off after years of receiving pay raises that made them unaffordable, including a 10% raise in 2015.
But despite the upbeat rhetoric, a crisis is looming in the nation’s second-largest school district as enrollment falls from a projected 514,000 in 2017 to 480,000 in 2020. Since the state’s main education funding formula is based on average daily attendance, this could force mass layoffs of teachers or even drastic measures like shortening the school year. A $422 million deficit is anticipated in 2019-20, with red ink after that for as far as the eye can see. None of this comes as any surprise. A blue-ribbon commission’s report issued in November 2015 said L.A. Unified was facing fiscal disaster because of the enrollment declines, which are primarily due to falling birth rates, and because of the cost of pensions and retiree health care benefits. Employee retirement benefits will claim 8 percent of the school budget in 2017-18 and more than double that sum in coming years as the state’s 2014 bailout of the California State Teachers’ Retirement System ratchets up required payments from districts and as more of the district’s aging workforce retires.