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About this blog: While state and federal politics dominate the headlines, local issues have an enormous impact on our everyday lives. This blog will attempt to shine a light on topics of public interest and facilitate greater participation in the ...  (More)

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Pension Contribution Changes To Have A Multi-Million Dollar Impact To Menlo Park School District

Uploaded: Jul 18, 2014

On June 23rd, I wrote about how the new budget passed by Governor Brown will significantly increase now much money school districts throughout the state will have to allocate to California State Teachers' Retirement System (CalSTRS) for teachers' pensions. At that time, I was not sure what the actual fiscal impact to our local school district, the Menlo Park City School District (MPCSD) would be, but I now have a figure. For 2014-15, the MPCSD will need to pay an additional $130,000 into CalSTRS. However, according to the MPCSD's Chief Business Official, Diane White, under the current plan, MPCSD CalSTRS costs will increase over the following six years to a $2.7 million annual increase that will bring the district's annual CalSTRS contribution to $4.7 million in 2020-21.

To put that number into perspective, the Menlo Park-Atherton Education Foundation (MPAEF), a non-profit that fundraises to augment the district's budget in order to provide for teacher development, science lab assistants and materials, funding for libraries, art, music, summer school, etc. raised $3.6 million in 2014-15 and $3.35 million the year prior. $2.7 million annually is clearly a substantial sum for the district.

As a quick review, Governor Brown's 32-year plan to close the 74 billion unfunded liability gap for teachers' pensions shifts a significant portion of the responsibility down to the school districts themselves, with the new ratio breaking down this way:
• 70% paid for by the districts
• 20% paid for by the state
• 10% paid for by the teachers
Under the plan, school districts' contributions to CalSTRS will more than double-- from 8.25% to 19.1% of payroll over a seven-year period. (Teachers will have 2.25% more of their pay withheld and the state's contribution will grow from 3% to 6.3% by 2017).

While many districts across the state are scrambling to find a way to pay for the increase (many of these districts have had to cut teachers and reduce programming over the past five years because of the economic downturn), MPCSD is in a better position because it has healthy reserves in its Economic Uncertainty Reserve fund to draw from. According to Joan Lambert, president of the MPCSD Board of Education, the district is fortunate to have built up these reserves, to have funding from healthy property tax revenue, and to have a local community that has generously supported the district through parcel taxes like the one approved in 2010. Still, Lambert acknowledges that the increases (which will soon total $2.7 million) "are a lot of money" and cautions that it is "too soon to say if cuts in services will need to occur" down the line. The district has been working hard to meet the challenge of exploding enrollment, and property tax revenue—augmented by the parcel tax-- may not always be able to keep pace.

For now, the district is able to meet the challenge presented by the increase because it has responsibly set aside a substantial reserve fund. (According to White, current board policy maintains a target of 20% to be held in reserves with no less than 15% maintained in any budget year and no less than 10% in multi-year projections.) But what if that reserve is threatened or cannot be maintained? The governor and legislature are working on something now that is a very real threat to the district's ability to maintain that reserve—and to therefore meet the increased pension costs down the line. More details on that to come…

Comments

Posted by Peter Carpenter, a resident of Atherton: Lindenwood,
on Jul 18, 2014 at 4:09 pm

Peter Carpenter is a registered user.

Erin,
Thanks for a great article.

Note that the Fire District budgets 41% of safety personnel pay for pensions even though CalPERS only requires that we pay them a much lower annual percentage - the difference is placed in a District reserve fund for the certainty that CalPERS will later ask us for much more:

"The current employer contribution rate budgeted for the Safety employees is 41 percent and the non-Safety employer rate is 16.691 percent. Currently, the actual rates are 29.556 percent and 16.691 percent respectively. The Board's budget philosophy sets aside any excess funds created by budgeting at the higher rates to offset potential future PER's Safety Rates in excess of the budgeted amounts. Once the actual employer rates are above 41 percent and 16.691 percent, the PERS Stabilization Fund Balance would be used to mitigate the impact to the General Fund."

"At the regular Board meeting of February 18, 2014, the Board of Directors authorized, by Resolution No. 1709-2014, a transfer of $2 million from excess revenues and the wages and compensation budget to the PERS Rate Stabilization reserve which is designed to mitigate the impact of changes in the employer contribution rate on the General Fund. The current fund balance as of March 31, 2014 is $10.856 million and the total unfunded pension liability is estimated to be $41 million for Safety and $2 million for Non-Safety."


Posted by Erin Glanville, a resident of Menlo Park: Menlo Oaks,
on Jul 18, 2014 at 4:20 pm

Thank you for the comments. It is responsible and necessary for the Fire District to add to a dedicated district reserve fund because, as you point out, it is only a matter of time before CalPERS will ask for more.


Posted by Untied PTA, a resident of Menlo Park: Downtown,
on Jul 20, 2014 at 1:14 pm

Thank you Erin, those figures are astronomical and truly scary. California school funding is already last in the US per student, and now we all have to contribute millions more for pensions, and not education? Why are parents not screaming? The PTAs and Educ Foundations across Cal should unite and fund lobbyists. Apparently thats the only way government works these days.


Posted by FollowTheMoney, a resident of another community,
on Jul 21, 2014 at 10:09 am

Time to do away with taxpayer funded pensions.

It's essentially math based on a Ponzi scheme. There is no way to guarantee the promised returns. Even a retired admin I know admitted to me it's all a scam on taxpayers.

He is collecting a $100k+ pension then his child will get a $50k+ pension for rest of their life. It could total $4-6 million - way more than his total combined salaries of his career - billed to the school district anf taxpayer.

www.pensiontsunami.com


Posted by Mike, a resident of Menlo Park: Fair Oaks,
on Jul 21, 2014 at 9:36 pm

I don't understand why all you rich folks are so cheap. You want people dedicated to your children but you want them to work for wages where they could never live in your community and never retire. Under Prop 8, only those who have moved into their homes in the past couple of years or so are paying their fair share for education. The rest of you are underpaying by as much as 90 percent. That is what taxpayers should be up in arms about. Or possibly the fact that the education budget is so small because so much money is spent on building prisons for drug addicts and making sure that people like Paris Hilton inherit more money than they could ever spend on whatever useless trinkets they please.


Posted by Sally, a resident of Atherton: West Atherton,
on Jul 22, 2014 at 7:36 am

When it comes to education, the hypocrisy is truly amazing. I hear politicians always talk about some teacher who made a difference in their life and how teachers should be respected. But when they retire? I guess you want to take them to the glue factory! Remember, we live in a fairly free market society. So why would anyone with skills and abilities teach? That may explain the decline in education: you get what you pay for. The problem isn't that teachers get pensions; the problem is that so few others get pensions.


Posted by Fran, a resident of Atherton: West of Alameda,
on Jul 23, 2014 at 5:52 pm

Sally, thank you for your common sense comment.


Posted by Dawn, a resident of Menlo Park: Belle Haven,
on Aug 10, 2014 at 10:03 pm

Thanks, Sally. You're so right. Too many people are being convinced by a well-funded effort that teachers are somehow scamming the taxpayers with their pension. I wonder how a breakdown of taxpayer dollars to corporations and the very wealthy would compare to taxpayer dollars paid out in public pensions. And funny how the one incidence of "scamming the public" came from an administrator. Not a teacher.


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