The California Public Employment and Retirement System (CalPERS) board will meet next week to set the employer contribution rate for schools for the 2021–22 fiscal year. The system’s staff has recommended the board adopt a rate of 22.91 percent for the period of July 1, 2021 to June 30, 2022. This amount represents an increase of nearly 11 percent over the current year rate of 20.7 percent.
Rates for school employers have seen modest drops in the current year and for 2021–22 due to consistent advocacy efforts spearheaded by CSBA and school board members in the last few years. The state agreed to provide relief to schools by paying down the rate in the current year with a contribution of $430 million and $330 million in 2020–21. These payments helped bring the rate down in the current year by 2.9 percentage points, and by 2.16 percentage points in 2021–22.
The CalPERS Finance and Administration Committee will hear the item on Monday, April 19, after the recent publication of actuarial valuation of the School Pool. The valuation indicates the pool’s funded status as of June 30, 2020 and sets forth the school employer and PEPRA employee contribution rates for fiscal year July 1, 2021 through June 30, 2022. The reason identified in the valuation for the change in the contribution rate include a year-over-year drop in payroll of 0.69 percent and a lower-than-expected return on assets. The valuation also notes that for the fiscal year ending June 30, 2020, the funded status of the Schools Pool increased by 0.1 percent, to 68.6 percent, which represents the ratio of assets to accrued liability. The system’s staff assigns this modest increase in funded status to the additional state contribution in July 2019, which helped against the lower-than-expected investment returns in that year.
CalPERS also released rate projections for school employers through 2026–27. School employers are expected to see a significant jump from the 2021–22 proposed rate of 22.91 percent to the projected 2022–23 rate of 26.1 percent — an increase of 13 percent. The 3.19 percentage point increase is due in part to the state buy-down for 2021–22. Without any additional support from the state, rates are expected to increase about 21 percent through 2025–26, then drop slightly in 2026–27.
Currently, the California State Teachers’ Retirement System (CalSTRS) estimates are just as stark, taking current year from 16.15 percent to 15.92 percent July 1, and then to 18.1 percent come July 1, 2022 for the 2022–23 fiscal year.