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Ouch! LAUSD to pay $1.1 billion for teacher pension rescue

Yana Gracile | July 7, 2014

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Teacher Pension BailoutLA Unified must come up with $16 million this year to pay an unexpected bill as a result of legislation signed by Governor Jerry Brown aimed at rescuing the state’s teachers retirement pension system known as CalSTRS, but the district’s total increase is much higher, estimated to reach an extra $1.1 billion over the next seven years.

While teachers and school districts across the state will see their contribution rates increase, LAUSD, the largest school district in the state, will pay the lions-share.

The rescue, which will help address a $74 billion shortfall in the teachers pension fund, requires school districts to radically raise their contributions to the fund from the current rate of 8.25 percent, to a rate of 19.1 percent by 2020. Teachers will see a more modest step up, from 8.15 percent to an eventual 10.25 percent of their salary, over the same seven year period. The state’s contribution will rise from 3 percent to 6.3 percent.

But In real dollar terms, the pension contribution price tag for LAUSD is steep: it will eventually more than double by the end of the phase-in period, from its current payment of $213 million per year, to $493 million per year by 2020.

“It is a daunting thought,” Dennis Meyers, executive director for governmental relations at the California School Board Association, told LA School Report.  “Districts were not expecting an increase in the 2014-2015 fiscal year so to have this plan to increase employer rates start so soon was a shock.”

“This doesn’t buy any more services for kids, this is a debt. It’s not going to result in   anything new or improved services for kids,” Meyers said.

According to Edgar Zazueta, LAUSD’s chief lobbyist, school districts requested a one year delay but were turned down.

“The governor’s office and the Legislature didn’t want to go there because they said if you delay a year, it will throw off the seven-year ramp up that the governor had proposed and what they would argue is that it would cost everyone more money.”

Superintendent John Deasy said in his budget report that the district should continue to find creative solutions to address fixed cost and long term liability issues.

“The District must remain vigilant, agile and resilient. There must be adequate on-going funding for all continuing expenditures, such as salaries and benefits for permanent employees, associated with any new initiatives or investments,” he said.

The steep payments leave school districts wondering how they’re going to balance their budgets, afford employee raises and reduce class size.

According to Meyers it’s a harsh reality, especially after the new school funding measure seemed to finally bring good news. “They were excited about the Local Control Funding Formula, the promise of new resources. [But] this increase, for a lot of districts eats away at most or all of that increase,” he said.

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