The Pension Monster that Devoured Education

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

I suppose not too many readers remember the television sitcom, The Many Loves of Dobie Gillis, from the late 1950s, early 1960s (Los Angeles County Supervisor Sheila Kuehl remembers because she acted in it) but one character, beatnik Maynard G. Krebs, often talked about a movie that he saw many times: The Monster that Devoured Cleveland. That fictional movie title came instantly to mind when reading about the pension costs that are eating up California education budgets, and created a fitting title for what is happening in the state’s education circles: The Pension Monster that Devoured Education.

Signs of lost revenue for classroom education because of pension and health care costs are all around.

As the San Francisco Chronicle reported last month, “Next year, officials said, rising pension costs will eat up more than a third of proposed increases to the state education budget.”

Education will be hit with a double whammy. The retirement fund for teachers CalSTRS, last week lowered the rate it expects to receive on investments. Gov. Brown’s budget calls for $153 million more to offset the rate change. Meanwhile, the large state worker retirement fund, CalPERS, which covers non-teacher employees, also projects greater funding concerns because of promised pension and healthcare costs. According to the Chronicle report, what school districts must contribute to CalPERS could double in just six years.

On top of the troubles for local school districts, last month the University of California Regents agreed to a 2.5% tuition increase, in part, to cover pension costs.

All this pressure to cover pension obligations squeezes school district and university budgets that provide educational programs.

And all this despite the avalanche of new tax revenue earmarked for education.

Voters generously supported schools by passing the income/sales tax increases under Proposition 30 in 2012 and then agreed to continue the income tax portion with Proposition 55 until 2030. More tax increase measures were passed in individual school districts around the state in recent elections.

Then again, from the beginning critics argued that much of the new tax revenue would simply go to into the pension hole. As Stanford lecturer and pension expert David Crane wrote last year, “Tax increases don’t solve the problem. In 2012 California voters passed a temporary tax increase known as Proposition 30 designed to generate an additional $50 billion in revenue over seven years. But as the math makes clear, all that revenue, and more, is being consumed by increases in retirement, health care and corrections spending.”

If massive tax increases can’t keep up with the pension and healthcare demands on the current system, then fixes to the system itself are in order. Unfortunately, it appears likely voters will face more demands for tax increases like a split roll and other moves to tax business instead of correcting the system. Such an effort would be disastrous for the state’s economy, which would further shrink resources schools count on.

In the meantime, like Maynard G. Krebs, we are seeing the same movie over and over again. Pension and healthcare costs continue to devour education budgets.

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