In many states across the country, education funding is at record levels thanks, in part, to federal COVID relief aid but also to the recent economic boom. Yet on the ground, many school districts feel like they’re in the midst of a recession. Here in California, some districts are even closing schools and others are using federal relief funds to plug budget holes — and that’s an emerging trend not unique to California. School district budget woes have a disproportionate effect on low-income, English learner, and BIPOC students, since these are the very students who benefit the most from the additional services that are often cut.
It would be easy to blame the pandemic for the budget crunch. After all, it costs more to address disrupted student learning, soaring mental health needs, and constantly evolving health and safety requirements. And to be sure, money matters: with adequate funding, districts can significantly improve student outcomes. But the problem isn’t just one of adequacy. We also need to look more deeply at the structural weaknesses in systems, policies, and practices undergirding normal school operations and view them through an equity lens. The fact is, there are hidden inequities eating away at school district budgets or diverting dollars from the highest-need schools and students, even in a progressively funded state like California.
At the Opportunity Institute, we believe that any conversation about school finance needs to be a conversation about equity. Whether we’re talking about how to count students for purposes of allocating funding, how to adjust for declining enrollment, how to distribute money to school sites, or how to reduce skyrocketing pension debt, equity must be a lens through which we make decisions and craft policy.
The Opportunity Institute aims to surface evidence and foster conversation about how state and local education leaders can improve resource equity in our schools. We are working with advocates and researchers in California, Mississippi, New York, and other states to make sure that state and federal dollars are spent equitably to ensure BIPOC students, low-income students, English learners, and vulnerable students such as foster and homeless youth are centered in education decision-making and receive the highest quality education.
But in addition to looking at spending, we are also looking at structural issues. One of those relates to teacher pensions. Today, teacher pension spending accounts for 14 percent of education spending nationally. California alone spent a whopping $10.5 billion on teacher pensions in 2020. The state’s spending on pensions has nearly tripled since 2010. That’s a lot of money, which could be fine if it meant that California could provide teachers with quality retirement benefits, sustain the system for the long term, and equitably distribute pension aid to districts needing it the most. Unfortunately, none of that is true. Moreover, pension spending consumes about 13 percent of California's total K-12 budget, crowding out other education spending. Making matters worse, those costs disproportionately harm lower-wealth communities and compound education inequities across the state.
The Opportunity Institute outlines the problems and potential solutions in a new report: Expensive, Inequitable, and Out of Reach: The Problems With California’s Teacher Pension System— and What Can Be Done.
As author Max Marchitello describes, the problem is not the pension itself: teachers deserve quality retirement benefits. The problem is that teacher pensions have become more expensive for state and local leaders to maintain, even as the actual benefit for teachers has gotten worse. In fact, teachers today work longer and receive less out of their retirement plan than the generations of teachers who came before them did. That’s not a big surprise, since most teacher retirement systems (including California’s state teacher retirement system, CalSTRS) were established in the early 20th century, at a time when labor markets, job changing, and student and teacher diversity looked radically different than they do today. But we don’t even have to go back that far to see that benefits have deteriorated in quality. As recently as 2014, state leaders reduced pension benefits for newer teachers. This was an effort to reduce costs, but it misguidedly came on the backs of teachers and their students.
The current system is simply unsustainable. Even as education budgets grow, more and more dollars must go toward pension debt, leaving less for today’s students and teachers. And, these impacts are not felt equitably. With state pension debt crowding out other school spending, the districts most dependent on state aid are the ones who feel the pinch the most. Not surprisingly, these are the districts with less property wealth and higher student poverty.
Further widening the gap, the state’s contributions to the pension fund on behalf of districts are structured so that the state always pays the same percent, regardless of how much the teachers earn or how well-off the district may be. And we know that higher wealth communities pay their teachers more. We’re a state that takes its progressive income tax structure for granted, but we’ve never questioned our regressive pension structure.
The solution is not to take away or reduce pension benefits, but instead, to reduce the debt, imagine alternatives that make sense for today’s teachers and students, and shift more state support to our highest-need communities. Those are not easy things to do, but they need to happen if we are to achieve adequate and equitable school funding.
We invite advocates and equity-minded leaders to join us in asking lawmakers how they plan to both safeguard educators’ retirement and also deal with pension debt so that more resources are freed up to serve today’s students and teachers — especially in the highest-need communities. This year’s state budget is a good place to start. With state revenues soaring, lawmakers could make a significant supplemental pension payment that would free up more funding for schools. Regardless of the solution, public education advocates, including BIPOC teachers, families, and community members, need to be at the table to ensure that pension decisions are made in the interests of equity, student success, and dignified retirement for our educators. Far from being mutually exclusive, these goals are in fact intertwined.