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RISING PENSIONS HIT MUSD
Manteca facing $12M annual jump in ongoing pension costs

Manteca Unified expects to pay $8.1 million more annually in salaries for teachers by the 2019-2020 school year.

At the same time district contributions to the California Public Employees Retirement System are set to go up by $12 million on a yearly basis.

Toss in the state making it clear school districts will not be getting any additional funding to cover spikes in pension costs and you the proverbial 900-pound gorilla in the room that will be overshadowing virtually every general fund spending decision the governing board will be making in the coming years.

 “We cannot change pension costs,” noted Manteca Unified Director of Business Services Jacqui Breitenbucher.

She pointed out the CalSTRS employer contribution rates are set in statute until 2021. They have been included in the current year’s budget as well as multi-year spending projections.

The goods news — at least for now — is the CalSTRS funds are performing according to projections made when the employer contribution rates were dictated through 2021. The CalSTRS actuarial consultant noted on May 10 the funding gap that was at $96.7 billion as of June 30, 2016 will adjust to $107.3 billion in June 30, 2017. If performance matches assumptions for the next three years it significantly reduces the chances of local school districts being hammered with more increases in 2022.

Manteca’s CalSTRS contribution is at 14.43 percent for the current school year. It will go up 16.28 percent for the 2018-2019 school year, and 18.13 percent by the 2019-2020 school year.

Meanwhile the state’s 977 school districts will need to absorb the pension cost increases that are coming over the next three years and still meet state mandates for having budgets that are sustainable.

It is likely to mean increased pressure will be placed on reserves by those seeking to soften future belt tightening moves. In the past during employee negotiations, some have looked at district reserves and slammed the board for not freeing up more money for salaries and other costs.

In reality the reserves are not extra money per se. They are set aside for major unexpected expenses such as emergency replacement of a heating system as well as economic uncertainties created how the state pays districts.

At the same time the district earmarks a month’s cash flow in reserves to cover ongoing expenses of which the lion’s share are salaries and benefits. By doing so they assure they can meet payroll when snags pop up in the flow of state dollars to districts. About a decade ago, one such snag pushed districts throughout California including Manteca perilously close to not being able to ae payroll. It stressed a number of employees — especially when households relied on two Manteca unified checks.

There was concern voiced by a number of MUSD employees at the time that they could fall behind on house payments and potentially lose their homes.

The cash flow reserve was able to prevent that from happening although if  the state hadn’t restarted the flow of funds it would have been a different story.

With the district’s general fund budget now at $288 million, the cash flow set aside comes to $24 million,

The district also has been cautious at not overspending on reoccurring expenses such as staffing. It is done to reduce the potential of precautionary layoff notices being issued and eventually real layoff notices when the state funding pipeline reduces the flow of funds to a trickle or delays their release.

Such a strategy allows for more job certainty as well as stability in classrooms — two goals school boards over the year have made a priority.

The vice grip created by escalating pension costs as well as the perennial uncertainty of school  funding has prompted  the Manteca Unified board to work with other districts through the California School Funding Coalition to addressing coming funding concerns driven primarily by retirement costs and how education is funded.

California is the only large state that ties its school funding to tax revenue sources that swing with the economy tapping into the pocketbooks of the state’s wealthiest taxpayers. When the economy is on a roll and they’re making money, taxes flow into Sacramento to fund schools. If the economy is in a recession and their profits or oncome are down, tax revenue drops accordingly.

The fact Brown is termed out in November means a new governor and possibly a new approach with how the state spends its money is forthcoming. Not only has Brown’s philosophy on education funding been a known quantity for eight years but he has consistently delivered on what he has said he would do.

That has allowed districts to enjoy relative budget certainty when they put together spending plans.

 

To contact Dennis Wyatt, email dwyatt@mantecabulletin.com