October 4, 2018
California’s Public Employee Pension Reform Act (PEPRA) of 2013 has ameliorated many of the causes of concern about public employee pension costs in local school districts; however, it is a long-term set of measures which reduces the modest but not insignificant unfunded liabilities over 30 years. According to Grant Boyken, Pension Benefits Officer for the California State Treasure’s Office, neither Cal STRS (63% funded) the teachers’ pension fund or CalPers (70% funded) the public employees pension fund is in any danger of depleting its assets any time soon. Bear in mind that these are 30-year actuarial projections and may or may not be accurate.
As vested rights in pension contracts are not legally available for revision (See in particular the California Supreme Court’s recent decision in the San Diego case), PEPRA relies on reforms enacted to pension contracts for new employees, which is why the 30 year time frame is important to keep in mind. It is also important to understand this when readers hear, as they did in Neil Rubenstein’s commentary (8/9) that the CCUSD Board is guilty of “unrealistic hiring practices”. Encouraging older faculty to retire and hiring new faculty replacements actually reduces pension liability over 30 years, while introducing young, eager, talented teachers to our classrooms.
PEPRA addressed two main problems involving public sector pension obligations: 1) The rise of pension contribution costs at a time when government budgets were stressed by decreasing tax revenues and soaring employee health costs; and 2) the market collapse of 2008-’09, during which both STRS and PERS lost one quarter of their value, creating the actuarial estimates of underfunding, over a 30 year period.
PEPRA increases minimum retirement ages. It enacted a single and less generous police and firefighter formula. It increases from one year to three years the time used to determine the highest average salary on which a pension is based. It increases employee contributions to 50 percent of the actuarial normal cost of the benefit, and eliminates any spiking opportunities.
Wouldn’t it be just peachy if we were able to maintain the same very high level of quality in our CCUSD schools, but cut costs by, say, reducing our teachers’ compensation? How likely do you think that would be?
Bruce Lebedoff Anders