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Study Finds California’s Unfunded Pension Costs Threaten Educational Equity

As unfunded pension costs balloon, report shows school districts forced to reduce teacher salaries and crucial services for high-need students

OAKLAND, CALIF. (April 23, 2019) — California’s chronic underfunding of education pensions is pushing school districts into financial distress, forcing them to make painful cuts that will increasingly harm both the state’s teachers and its most vulnerable students, according to a report released today by Pivot Learning. The Big Squeeze: How Unfunded Pension Costs Threaten Educational Equity paints a vivid picture of a state education system in crisis —where school districts are struggling to make pension payments while also providing teachers and students with the resources they need.  

By 2014, the California State Teachers' Retirement System (STRS) had accumulated a staggering $75 billion funding gap and was projected to run out of resources. To help close the gap, California lawmakers shifted much of the financial burden to school districts. While districts paid approximately $500 per pupil in 2013 for employee pension costs, they will pay $1,600 per pupil in 2020, according to the state’s Legislative Analyst’s Office.

“We’ve labeled these increases ‘The Big Squeeze’ because they are strangling public education funding,” said Dr. Arun Ramanathan, CEO of Pivot Learning, an Oakland-based nonprofit that partners with educators across California and the nation to help them achieve educational justice.

The release of the report is part of an ongoing project led by Pivot Learning, in collaboration with the California School Boards Association, national pension expert Dr. Corey Koedel of the University of Missouri, and the Opportunity Institute.  

The researchers analyzed over ten years of budget data from nearly 100 districts, surveyed 115 school board members and conducted over a dozen interviews with school district staff, pension policy experts and community advocates.

According to the report, as pension payments mount, districts are forced spend money in ways that threaten educational equity, including raising class sizes; cutting enrichment opportunities like art, music and after-school activities; and reducing counseling and health supports.

Researchers found that, to help making rising pension payments, many districts admitted to tapping into funding intended for the neediest students. More than one in five districts said they are using supplemental and concentration grant funding from the Local Control Funding Formula – which is supposed to be used to increase and improve services for English learners, foster youth and homeless students – and putting it toward their pension payments.

“The students who need the most are the ones who are losing the most,” said Christopher Edley, Jr., a professor at UC Berkeley School of Law and president emeritus of the Opportunity Institute. “There is no equity or fairness in a system that takes money away from students who are already marginalized.”

The report demonstrates that teacher salaries are also taking a hit. The report’s analysis of 98 district budgets reveals that as the portion of district budgets spent on benefits has increased, the portion spent on teacher salaries has declined by five percentage points. In addition, 88 percent of surveyed school board members reported that increased pension and benefits costs hinder them from providing higher salaries for teachers.

“An abundance of research has already demonstrated the powerful impact of effective teachers on student learning,” said Carrie Hahnel, a co-author of the report. “As long as school districts can’t afford to properly compensate and support educators, we’ll lose more and more of them – and our students will lose too.”

The Big Squeeze not only sounds the alarm about the equity crisis facing California public schools; it offers solutions for school districts and state policymakers. One is to adopt Governor Gavin Newsom’s recent proposal to spend $700 million from the state’s general fund to cover pension costs while also making a $2 billion down payment into the state’s pension fund for teachers. The report’s authors argue that the governor and legislature should extend these commitments and ensure that districts have the funding necessary to increase critical supports for low-income students, foster youth and English Learners.

The report demonstrates that, to meaningfully address the unfunded pension crisis while ensuring schools are properly resourced, California must generate new revenue. One way to do this is by amending Proposition 13, the 1978 cap on property taxes that has led to a sharp reduction in public school funding.  

“The solution isn’t to take away pensions or slash benefits,” said Ramanathan. “State leaders need to fully fund our education system and keep California’s promises to retirees, current teachers, and today’s students, particularly the most vulnerable.”

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About the Opportunity Institute
The Opportunity Institute is a nonprofit organization that helps address poverty and racial inequality by building cradle-to-career opportunities that break down barriers and deliver excellence in education, health, and society. Our current projects focus on P-12 education equity, whole child equity, math equity pathways, and education access for people impacted by incarceration. For more information, please visit theopportunityinstitute.org

About Pivot Learning Partners
Founded in 1995, Pivot Learning is a nonprofit organization of K-12 education experts who work directly with districts to address their biggest challenges, including raising student achievement and closing unconscionably large achievement gaps. Our mission is to partner with educators to design and implement solutions to their greatest challenges in achieving educational justice. We envision a future where our public schools provide our most underserved students with an outstanding education. In 2017, Pivot acquired the Consortium on Reaching Excellence in Education (CORE), which expanded our reach and our capacity to support research-based intervention in literacy and math. www.pivotlearning.org