Latest Evidence of California’s Pension Crowd-Out: Less Classroom Funding

Latest Evidence of California’s Pension Crowd-Out: Less Classroom Funding

My colleagues and I have written often about California’s pension crowd-out, or how state and local governments budgets are increasingly gobbled up by public pension payments.

Last fall, PRI’s Wayne Winegarden released a new study showing that, using a more realistic accounting measure, California’s unfunded public employee pension obligations stood near $1 trillion.

We’ve talked on PRI’s “Next Round” podcast with brave pension reform advocates, including David Crane of Govern for California and Pete Constant of the Retirement Security Initiative, who spoke of how unsustainable public employee pensions mean fewer dollars available for education, transportation, health care, or important priorities.

In the latest example, a new report shows how California’s pension crowd out is threatening classroom dollars.

CalPensions.com, written by veteran Capitol reporter Ed Mendel, reports that “Pivot Learning, a nonprofit school consultant in Oakland, issued a report this month on rising school pension costs.”

Continuing, he writes that, “in a third of the districts, ‘The Big Squeeze’ found rising pension costs increased class sizes and cut enrichment programs such as art, music and after school activities.  While pension costs rose, the share of school district budgets spent on teacher pay declined 5 percent.”

While teacher salaries have rebounded since the Great Recession, Pivot concludes that, “if not for the rapid rise in pension costs, the increase in teacher salaries likely would have been larger.

Most troubling, the CalPensions article notes that school funding in poor and inner-city schools has also taken a hit thanks to rising pension public employee pension payments.  “’California’s pension squeeze is exacerbating the inequity in public schools by forcing school districts to decrease services to our neediest students,’ said the report.”

Facing rising pension costs, politically charged unions demanding more money, and Sacramento-imposed limits on school district reserves, many districts have chosen to shirk their responsibility to make tough but fair choices to balance their budgets.  As my colleague Lance Izumi wrote, this is what has happened in Los Angeles with the settlement of their recent strike.

When confronted with a massive strike and ongoing fiscal problems, LAUSD’s solution was to punt to taxpayers and demand that Prop. 13 be changed to impose a split-roll property tax system.  A split-roll property tax would be an estimated $11 billion tax hike.  The goal of districts like LAUSD is to shakedown local and state taxpayers to generate enough revenue to fund unsustainable pensions and other fiscally-irresponsible budget choices.

It’s why Los Angeles Unified voters will vote in June on a $500 million annual tax increase – a parcel tax on homeowners to bail out the district for their poor spending choices.  (It’s also the reason why, in my view, a group of Democratic lawmakers are proposing to lower the threshold required to approve local government “special taxes” or bond measures to 55 percent – to bring in a new source of local dollars to pay for popular spending and free up other money for cities and counties to pay for pensions.)

Keep in mind that school districts are facing these tough budget times despite 7 or 8 years of record state education budgets.

As the Pivot report indicates, teachers in Los Angeles and other communities could have received the larger raises they have demanded recently had fiscal responsibility carried the day in school district budgeting.

Because local districts failed to budget for the future, we’re sure to see more painful cuts, politically-charged battles, and demands for higher taxes in the coming years as policymakers face California’s pension day of reckoning.

Tim Anaya is the Pacific Research Institute’s communications director.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.