What the $3 billion CalSTRS proposal in the 2019-20 budget means for local schools

About 20 minutes into last week’s marathon budget press conference, Gov. Gavin Newsom began discussing the issue of pension cost increases – and was kind enough to name-drop California school board members and CSBA in the process.

Watch a clip of Gov. Newsom discussing pension relief (Jan. 10, 2019)

“We are adding an additional $3 billion into immediate relief to school districts to address their STRS anxiety…” the Governor said, in a statement met with off-screen applause from Superintendent of Public Instruction Tony Thurmond.

“…Which Tony Thurmond seems enthusiastic about – and if you are a member of a school board, you are enthusiastic about this as well,” the Governor added with a smile. “I will never forget our school boards association meeting, where they almost, quite literally didn’t want to talk about anything else.”

While there are always innumerable issues that CSBA routinely discusses with lawmakers in Sacramento as it comes to improving public education in California (school facilities bonds, charter school transparency, special education, etc.), Gov. Newsom’s statement Thursday was indicative of the persistent and ardent advocacy of CSBA and governing board members statewide regarding the pension contributions issue.

CSBA is resoundingly appreciative of Gov. Newsom’s recognition of the concerns of local education agencies regarding pension costs, and is greatly appreciative of the $3 billion investment in CalSTRS proposed in the 2019-20 budget.

This proposal directly signals that the voice of governing board members statewide has been heard in Sacramento, and that the tireless advocacy efforts of CSBA and its members on this issue is translating to results – this proposal delivers tangible and considerable savings to school districts and county offices of education.

What the $3 billion proposal does:

$3 billion total proposed CalSTRS contribution rates is one-time non-Proposition 98 General Fund money, and would all be paid out during the 2019-20 budget year:

• $700 million ($350 million each for 2019-20 and 2020-21) direct buy-down of employer contribution rates, reducing rates by 1 percent in each of those two budget years.
• $2.3 billion committed to reduce the employer unfunded liability, with a resulting 0.5 percent projected reduction in employer contributions beginning in 2021-22.

Employer contribution rate drops from 18.13 percent to 17.1 percent.
Estimated savings*: Appx. $50 per student

Employer contribution rate drops from 19.1 percent to 18.1 percent.
Estimated savings*: Appx $50 per student

2021-22 and ongoing:
Employer contribution rate drops an estimated 0.5 percent each year.
The $2.3 billion reduction in what school employers owe is projected to save school employers $6.9 billion over 30 years, according to the Department of Finance.
Estimated annual savings*: Appx. $30 per student

*estimates are based on total statewide certificated payroll and current average daily attendance.

CalPERS proposal does not impact schools

As CSBA reported last Thursday, Gov. Newsom’s budget also proposes a transfer of $3 billion from the General Fund to CalPERS – however, this investment would apply to the state as an employer, and not to LEAs for classified staff wages.

Please email Governmental Relations if you have questions regarding the CalSTRS proposal or other aspects of the 2019-20 budget proposal. CSBA will continue to report updates on budget negotiations at the Capitol leading up to the May Revision

Click here to register for the free 2019-20 Budget Perspectives Workshops.