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 revenueaugmented 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 reserveand to therefore meet the increased pension costs down the line. More details on that to come…