Teacher Pensions Blog

More money for schools is good news. It’s even better when a large portion of those funds will be distributed equitably across the state. In California, the state recently approved a new budget that includes a one-time payment of roughly $1 billion for the state’s school districts. This amounts to more funding than is required by the state funding formula. It’s big news.

But don’t pop the champagne just yet.

School district expenditures for the state’s teacher pension fund (CalSTRS) will increase by more than $1 billion annually until 2020-21. In other words California will need to make this onetime payment every year until 2021 to fill the budget gap created by the increase in districts’ pension spending. As it stands now, the state’s school districts will be around $3 billion short.

Without any additional help, districts will likely need to cutback in other education expenditures to be able to fund the pension system. This consequence makes clear that pension spending cannot be separated from school funding. One affects the other.

Unfortunately, the new state budget won’t help either despite allocation an additional $6 billion from the state’s reserves to pay its public employee pension fund. Nearly doubling the state’s investment into the public pension system this year will reduce the fund’s long-term debt and save taxpayers billions in the long run.  And while that is good news for the state’s own pension obligations, it will do nothing to help districts make their payments this year.

California may at first look like it is increasing funding for school districts, but in reality this budget serves only to blunt the impact of rising pension costs for a year. It’s a Band-Aid too small to cover a gaping wound. Barring a massive increase in K-12 education spending, pension reform is necessary to actually grow school district budgets and to direct more funds to schools.