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Gavin Newsom’s budget aims to spare California schools from some pension pain

Gov. Gavin Newsom’s first state budget frees up hundreds of millions of dollars for financially strapped schools by easing pressure on their pension rates and steering some additional money to them for special education programs.

The agreement won’t necessarily spare distressed school districts like Sacramento City Unified from cuts, but it could help them stave off some hard decisions.

“It’s a stronger budget than we’ve seen in recent years,” said Troy Flint, spokesman for the California School Boards Association. “This budget is helpful for school districts, particularly those in financial peril.”

The budget framework lawmakers released this week is expected to lower projected pension rates by 1 percent below what schools were projected to pay for teacher retirement plans next year, letting school districts spend money that would have gone to retirement plans on other classroom priorities. The budget aims to lower projected pension rates in the 2020-21 financial year by .7 percent.

Over the next two years, the budget allocates $850 million to immediately reduce school pension rates by paying a share of what they owe to the California State Teachers’ Retirement System and the California Public Employees’ Retirement System on their behalf.

Separately, the budget sets aside an additional $5.2 billion to pay down long-term pension liabilities for California school employees. Those payments also are projected to lower pension rates for the state and for school districts over time.

“Schools and community college pension contribution rates are still rising,” said Kenneth Kapphahn, a policy analyst at the office, “But this rate relief means they will rise more slowly.”

All together, lawmakers are ready to spend $101.8 billion on K-12 schools in the next budget year, a $4.6 billion increase over the education budget that former Gov. Jerry Brown signed a year ago. The Legislature is expected to vote on the budget this week.

Some education advocates had hoped for more funding in the final budget released this week, particularly because Assembly and Senate budget proposals included more money for pension relief, career technical education and special education programs.

“The governor gets credit for trying to thread the needle on everybody’s different wishes,” said Kevin Gordon, a lobbyist whose firm, Capitol Advisors Group, represents school districts.

California’s long economic expansion filled the state budget with a surplus that’s projected to approach $22 billion, but some local school districts are struggling.

Teachers this year went on strike in Los Angeles, Oakland and Sacramento, demanding wage increases to help educators keep up with the state’s high cost of living.

Sacramento City Unified, meanwhile, is still in danger of a state takeover because of projected deficits.

“We appreciate Governor Newsom’s continued commitment to increasing resources to fund public education in California,” said David Fisher, president of the Sacramento City Teachers Association. “If we had sound fiscal management in our district, we would be able to vastly improve services to students.”

A spokesman for the school district said the administration had already accounted for Newsom’s pension relief following the release of his May budget update. The numbers released this week are not significantly different from last month’s proposal.

The governor’s budget also included a $645 million increase in funding for special education, “an area where costs have been rising rapidly in recent years,” Flint from the school board association said.

Pension rates at California school districts have been climbing since 2013, when the state began a series of rate increases to pay down long-term debts in the California State Teachers’ Retirement System.

That year, districts paid 8.25 percent of teachers’ wages toward educators’ pensions. That rate has nearly doubled to 16.3 percent and it was scheduled to climb to 18.1 percent in July.

The pension relief included in the state budget is expected to put CalSTRS pension rates at 17.1 percent for the coming year. The rate is projected to rise to 18.4 percent in the 2020-21 budget year. It would have been 19.1 percent without the additional payments. 

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