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By Erin Glanville

What Will California Pension Contribution Increases Mean For Local Schools?

Uploaded: Jun 24, 2014

The new budget that Governor Jerry Brown signed last Friday will significantly increase how much money school districts have to set aside for teacher pensions. That is going to have a big impact on schools, including our local ones.

On the one hand, the new budget boosts student spending due to voters' passage of Proposition 30, back in 2012, which raised taxes on wealthy individuals and increased sales tax revenue from 7.25% to 7.5%. On the other hand, the new budget also takes steps to address a feared teacher pension shortfall by transferring more money out of school districts' budgets beginning this year. Under the new plan, school districts' contributions to the California State Teachers' Retirement System (CalSTRS) will rise from 8.25% to 9.5% of payroll. That is just the beginning, as those increases will grow to 19.1% of payroll over the next seven years.

What will this mean for our local schools? Local education leaders are still trying to figure that out. Scott Hinshaw, a board member of the Menlo Park City School District, confirms "the increase in pension contributions is certainly going to effect and cause us to make some changes to our budget." He adds that the bigger concern "is that this happens immediately." Hinshaw goes on to say "Our district is fortunate to have some reserves set aside for something just like this to cover the unexpected additional cost to our budget now, but that is not sustainable and we are going to have to discuss how we will need to adjust our budget in the coming years to address this."

Exactly how much more money local districts will need to transfer into teacher retirement pension plans over the next seven years – and how that will impact planned programming-- is yet to be determined. What is clear, however, is that pension costs will become more visible and relatable in the context of local school budgets.

Stay tuned.