Public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars from classrooms into retirement accounts, education officials said.So why would they need to do that?
The depth of the funding gap became clear to district leaders when they returned from the holiday break: What they contribute to the California Public Employees’ Retirement System, known as CalPERS, will likely double within six years, according to state estimates.
CalPERS, a public pension fund with $300 billion in assets that is the country’s largest, manages retirement benefits for 1.8 million current and former city, state and school district employees, though it does not cover teachers, who fall under a different pension system.
School district officials say that unless the situation changes, they will have to make cuts elsewhere, possibly leading to larger class sizes, stagnant worker pay, fewer counselors and librarians, and less art and music in schools. Insolvency and state takeover are not out of the question for some districts.
California’s pension problem isn’t new. For years, economists and policymakers have warned that the state’s pension systems won’t have enough money to fulfill promises to millions of current and retired workers. But next year, officials said, rising pension costs will eat up more than a third of proposed increases to the state education budget.And if California comes with hat in hand to Washington? Let's see how that one goes.
There is a predicted shortfall among all state retirement accounts of at least $230 billion based on what’s owed to current and future retirees. The pension funds, including CalPERS, haven’t made as much money from the stock market and other investments as they had hoped.
That means school districts — like other public agencies — have had to backfill pension funds. Workers have also been forced to pay more. But it hasn’t been enough.