Teacher Unions Reap What They Sow With Unsustainable Pensions

The unions that represent California teachers have demanded, and received, platinum retirements for their members. But the good days at someone else’s expense cannot last forever. California teachers are beginning to feel the pain that they inflicted on themselves.

“Schools are laying off employees and slashing programs,” the Wall Street Journal reported in late June, while “some districts complain they are having trouble retaining teachers.”

Or as the headline says, “California is losing teachers and laying off secretaries.”

Allysia Finley, a member of the Journal’s editorial board, noted that California “schools last year issued thousands of pink slips” and “hundreds more have gone out this year.” But teachers aren’t the only employees losing their jobs. Many systems “are laying off secretaries and support staff to pay for teacher raises and pension benefits that have been collectively bargained.”

Others have also noticed. The LA School Report said last fall that “pension payouts are growing so fast that California’s school districts are being forced to lay off staff and close schools.”

The California State Teachers Retirement System earlier this year reported that teachers are owed $107 billion in pension benefits that the system doesn’t have. At the end of June last year, with $209 billion in assets, the CalSTRS system was only 62.6 percent funded, a full percentage point lower than the previous year.

The Stanford Institute for Economic Policy study, “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030,” tells us that employer contributions to public employee pensions spiked 400 percent from 2002-03 to 2017-18. As recently as 2013-14, the school districts’ contribution rate was 8.25 percent. It has nearly doubled in the current year to 16.28 percent, and is expected to exceed 19 percent in three years.

This is trouble for teachers. When pension obligations devour big chunks of a district’s operating expenses, there are simply fewer dollars available for them.

For instance, the Los Angeles Unified School District’s pension contributions to CalSTRS and the California Public Employee Retirement System, which represents school employees who don’t have teaching certification, have increased to about 9 percent of the system’s operating expenses. This “has put downward pressure on other district expenditures,” says the Stanford report. “It appears that higher pension spending has led to reductions in total salaries paid to staff and/or reductions in their number.”

By 2029-30, the LAUSD pension funding crowd out could potentially “require a 7 percent reduction in salary expenditures,” which could be either salary cuts and/or reductions in the number of employees, “or 4 percent reductions across the board.”

A case study of the Mill Valley School District in the Stanford report found that the crowd out could require that system to slash salary expenses by 9 percent.

Teachers aren’t the only group whose retirement demands have backfired. The Stanford study says “pension costs have crowded out and will likely to continue to crowd out resources needed for public assistance, welfare, recreation and libraries, health, public works, other social services, and in some cases, public safety.”

The result, of course, is a loss of jobs — some of which aren’t unionized. Oroville had to cut its workforce by one-third just a few years ago. Santa Barbara County let almost 70 social service workers go in 2017 because of $700 million in unfunded pension liabilities. Layoffs due to the pension crowd out have also hit Laguna Hills, Monterey County, Tuolumne County, Kern County, and Riverside County, where all but one of the 32 employees who lost their jobs last year was a non-union worker.

The public employee unions have tried to have it all, and for a while, they almost did. According to the California Policy Center, there are more than 50,000 members of the $100,000 Club, an exclusive circle open only to retired public employees whose taxpayer-provided pensions bring them $100,000 or more a year. The average CALPERS retirement package is $70,000 a year, about $10,000 higher than the national median household income.

But now some members are paying for the public employee unions’ excesses. And it’s not only in layoffs. The U.S. Supreme Court’s Janus ruling, which said government employees don’t have to pay agency fees to unions they don’t want representing them, could lead to the unions losing as much as a third of their members, as well as a large portion of the dues organized labor bosses so nakedly crave. Consequently, their political clout in Sacramento might be permanently weakened. That’s good news for taxpayers.

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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.

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