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YOLO COUNTY NEWS
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Ed code is not about education

RichRifkinW

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From page A6 | April 10, 2013 | 4 Comments

“We cannot continue. Our pension costs and health care costs for our employees are going to bankrupt this city.”
— New York Mayor Michael Bloomberg, April 9, 2009

You might think that with stock indexes reaching all-time highs, California’s pension crisis is now, if not solved, at least manageable. It’s not.

CalPERS decided in late March to raise employer rates another 50 percent over six years to stabilize its fund. In February, CalSTRS reported that it needs its funding by state taxpayers increased another 75 percent.

That PERS rate hike will not just devastate our city, county and state. It also will injure the Davis school district, even though most of its pension funds go to the California State Teachers Retirement System.

The PERS rates for school districts will begin climbing in 2014-15; for cities, the start date will be a year later.

The DJUSD currently has 1,019 full and part-time employees who have pension benefits: 385 with PERS; 634 with the STRS. Five years ago, the district had 40 fewer people with PERS, but 87 more teachers.

In 2007-08, the PERS cost for the district was $1.08 million on a payroll of $11.61 million. This year, the cost is $1.41 million, a 30.3 percent increase, on a payroll of $12.33 million.

If non-classroom salaries inflate by 3 percent per year, the district’s funding cost in 2020-21 will be $2.67 million on a payroll of $15.62 million. That additional $1.26 million will eat the salaries of 18 full-time teachers.

A factor in pension funding going forward is that new district employees will have a slightly less lucrative PERS plan. Today, the district’s non-teachers are on a 2 percent at age 55 formula. The reform of 2012 puts new hires on 2 percent at 62. Unless the DJUSD has massive turnover soon, that will offer no relief for a long time.

Unlike with other PERS-affiliated agencies, school districts in California have had no flexibility to decide what pension formulas they gave their teachers or other employees. They are set by state law, and our laws are written by and for the unions.

Likewise, local districts have no power to decide how much the employees pay and how much the employer pays. The current employer rate for PERS is 11.417 percent; the employee rate is 7 percent. The state requires that each pay those exact shares.

By contrast, most city of Davis employees have not had to pay any percentage of their salaries to fund their pensions. Per their “negotiated” contracts, the taxpayers of Davis have contributed both the employer and employee shares.

When the schools’ rates increase by 50 percent, that will likely all fall on the employer share. The new rate will be 17.126 percent.

However, Bruce Colby, the Davis district’s associate superintendent for business services, told me last week that “current state law caps school districts at 13.02 percent,” the employer rate in the 1981-82 school year.

The education code says if the rate set by PERS is greater than 13.02 percent, the state will increase its funding to schools to make up that difference.

Because the state is going to be drowning in debt for decades, it won’t have the money to pay those costs. The Legislature will have to change the law to allow higher rates.

Unless our school board gets employees to take a pay cut — how likely is that? — the only state-permitted response to the increase in PERS rates will be to lay off junior personnel — mostly teachers. That means for the same tax bill, Davis students can expect worse schools.

I suggested to Colby that the district ought to consider the route the city of Davis took with its tree maintenance crews. When their union would not play ball, City Manager Steve Pinkerton outsourced their jobs. Pinkerton laid off nine city workers and replaced them with private landscaping contractors who do better work.

The new workers make the same wages and receive the same medical benefits. But they are less expensive to employ, because Davis does not fund their pensions or pay for their post-retirement medical care.

Why couldn’t the DJUSD outsource its facilities’ maintenance and janitorial work?

Alas, Colby informed me state law prohibits that. The education code — written by and for the unions — describes rare circumstances where outsourcing is permitted, but only if “the contract does not cause the displacement of school district employees.”

Most Californians likely think we’ve come through the worst of times. The unemployment rate is finally under 10 percent. Tax hikes on the rich are supposedly going to be our salvation. Home prices are up.

However, the worst is yet to come. We have not solved the problem of unsustainable compensation for public employees. Their pensions and medical bills continue to mount.

Because our corrupt Legislature is of, for and by the unions who pay for their campaigns, one thing is certain: The resolution to the crisis in pension funding will not improve educational outcomes. It will be rigged to improve the lot of the employees who own our politicians.

— Rich Rifkin is a Davis resident; his column is published every other week. Reach him at Lxartist@yahoo.com

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Discussion | 4 comments

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  • Bruce Colby (School Business Official)April 10, 2013 - 12:19 am

    The net PERS cost to DJUSD has not risen 30% since 2007-08. The net cost was set at 13.02% in 1981. When the PERS rate is lower than 13.02%, the district's State revenue is reduced by the equivalent savings. The State of California budget has received the savings when the rate is lower. There is no projected impact from PERS cost in our future budget that will translate to teacher staffing reductions.

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  • Rich RifkinApril 10, 2013 - 11:27 am

    "The net PERS cost to DJUSD has not risen 30% since 2007-08." ... In 07-08 the PERS pension bill was $1.08 million. It is $1.41 million, this year. That is a 30.56% increase. ... "There is no projected impact from PERS cost in our future budget that will translate to teacher staffing reductions." ... That is your opinion. It is not fact. What happens entirely depends on whether the state has the money in the coming years to cover the added costs for PERS and the added costs for STRS. Because STRS is in such dire trouble, its bailout is going to create a huge hole in the state budget by itself. The 50% increase in employer rates by PERS will be on top of that. The state will first have to come up with this money to cover the pensions of all of its direct employees. It is implausible that after bailing out STRS and spending tens of billions more on PERS, the state will have extra money to cover millions of dollars in extra costs for PERS for every school district in our state. If you are counting on the state having that much extra cash in future years, you are not planning wisely. We will be lucky to only lose 18 more teachers. It may well be much worse when the sh## hits the fan.

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  • Bruce Colby (School Business Official)April 10, 2013 - 10:21 pm

    Mr. Rifkin, I fully understand your concerns and your thoughts and opinions on this topic. The increase you are stating is true for that one budget line. My point is that you are missing another budget line named “PERS Reduction” that has gone down the same amount, keeping our net cost flat over that time period. It is one of our complex accounting items in State funding. The fact is that any PERS changes above our 13% cap are relatively small in total dollars ($1m or less) for the total district budget over over $70m. This level of impact in the out years could be covered by State funding increases as the State revenues are up and education funding is projected to increase by billions of dollars. The fact is that the PERS rate passed through to districts is capped at 13% by current law. It is your opinion that they will change the law in the future. I do not ignore that it could change; I deal with this as a "potential risk” and have shared this in public with the school board. I just spent three days in school finance workshops on the latest budget information and I have received no official budget assumptions from State experts that would have me put any changes into the future year budget projections at this time. This could change in the May Revise budget but the consensus by State fiscal experts is that the State finances are growing at a positive rate and at a faster pace that anticipated in January. Based upon this information, I am more optimistic than you the State will find a solution that does not lead to teacher layoffs to cover pension costs. That is not the political path I foresee from my view. I think we can agree to disagree on this topic.

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  • Scott DescheemaekerApril 11, 2013 - 4:01 pm

    Rich-- thanks for shedding light on this subject. It appears Bruce still believes there is a pot of gold at the end of the rainbow (the State of California). The following is an except from an article that was in the SacBee last week. Please note, the $127.2 billion doesn't include unfunded liabilities for pension and retiree health care which could add "several hundred billion" to the liabilities. ************************************** Were California's state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits. The report, which covers the fiscal year ending June 30, 2012, says that the state's negative status -- all of its assets minus all of its liabilities -- increased that year, largely because it spent more than it received in revenue. During the 2011-12 fiscal year, the state's general fund spent $1.7 billion more than it received in revenues and wound up with an accumulated deficit of just under $23 billion from several years of red ink. Gov. Jerry Brown has referred to that and other budget gaps, mostly money owed to schools, as a "wall of debt" totaling more than $30 billion.

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