Tuesday, March 21, 2017

Money, Money, Who's Got the Money?

Over 40 school districts in California, including San Diego and Los Angeles, are looking at the proposed 2017-18 state budget and realizing they are going to have to make significant cuts, including many layoffs.
What happened?
Overall, per pupil spending from all sources for 2017-18 is projected to be 2.5% higher than 2016-17. (see p.19)
Even CSEA, a California union for classified school employees, admits schools are getting more in 2017-18. (see p.2)
So why the cuts?
School districts will claim that they are hemorrhaging money because of charter school students taking money away from the districts.
The data doesn't paint the kind of picture that would put these districts in that kind of a squeeze:

(Not including private schools)
Enrollment 2011-12   2012-13    2013-14    2014-15    2015-16
All        6,220,993 6,226,989  6,236,672  6,235,520  6,226,737
Charter    438,474   471,501    514,275    544,980    572,752
Public     5,782,519 5,755,488  5,722,397  5,690,540  5,653,985
Pub. Loss%           0.47%      0.57%      0.56%      0.64%


We see public schools in CA losing about half a percentage point each year in enrollment to charters, even not factoring in the loss in overall enrollment in the last two school years listed. Now how is that to blame for budget deficits approaching 10%?

Now we come to the problem the unions don't want you to see: pensions. While most Californians were gearing up for Christmas 2016, CalPERS dropped its expected rate of return on investments from 7.5% to 7%. This has the immediate effect of ramping up required contributions from districts, except that the rate drop is being phased in over 3 years, so the contribution increase will be phased in over 3 years. Contribution rates will increase from 13.88% in 2016, to 15.8% in 2017, to 17.7% in 2018, and so on and so on, where by 2023 projected contribution rates will be at 28.2%!!!!! That's a doubling in 7 years! This is what California school districts face!
The only time contribution rates have been this high before is in the early 1980s, where they reached 13.12%. But that was the max. We aren't stopping at 13 percent this time. This isn't the 80s all over again.
Jerry Brown is not going to have the state cover the difference. As a matter of fact, Brown wanted CalPERS to drop the expected rate of return all the way to 6.5%!!!! Talk about a bloodbath if that had happened! Why would Brown urge that kind of action if he thought the state would make up the difference?!

Districts have the option, starting 2018, to start making employees contribute up to 50% of the district's cost for their pension. Most post-2013 employees right now contribute more along the lines of 25%, with those prior contributing none. The unions and the baby boomers running them aren't going to take such proposals lying down. How many more jobs are going to lost before the unions get that defined benefit plans are no longer feasible in our new normal low growth environment.
This cannot end well.

No comments: